Have you been thinking about leasing your property for a potential solar lease? A solar lease is a great opportunity for property owners to have a second stream of income either via monthly payments or annual payments for a 25 to 50-year lease. Knowing where to start is the most important step in evaluating your property’s potential for a solar lease.
LandGate provides property owners with a free property report to assist in property evaluations. Energy developers perform their due diligence to pick a potential development site and LandGate provides those factors as well as a free estimated lease payment. Once you understand your property’s potential, you can list your property for free on LandGate’s unique marketplace to start receiving offers!
Due Diligence Investigating
Due diligence is of paramount importance when entering into a solar lease agreement. This legal contract grants a solar developer the right to install and maintain a solar panel system on a landowner's property, while they typically sell the generated electricity back to the local utility company. In exchange for the use of their land, the landowner receives lease payments.
To foster trust and establish a mutually beneficial relationship, both parties involved in the agreement must conduct thorough research. This becomes even more crucial given the long-term duration of solar land leases, which can span from 25 to 50 years. Taking the time to delve into the details is well worth the investment.
While it is true that most solar energy companies have good intentions, it is important to acknowledge that every industry also has its share of bad actors. Thus, it is the responsibility of landowners to diligently research to ensure that they are working with a reputable and trustworthy company. A real estate agent who has experience in dealing with energy companies can also be a useful resource when it comes to understanding the terms of a contract and the background of an energy company.
Solar Farm Land Requirements
When considering the land requirements for a solar farm, there are several factors to take into account. While there isn't a definitive answer to the question of how many acres are needed for a solar farm, a good starting point to attract utility-scale solar developers is around 30 acres. However, it's worth noting that listing land under 30 acres for solar farms may make it more challenging to secure solar lease agreements.
On the other hand, smaller parcels of land, typically ranging from 5 to 10 acres, are often better suited for community solar farms. If you'd like to learn more about the difference between utility-scale and community-scale solar farms, you can find valuable information here.
In terms of capacity, it's generally estimated that approximately 2 acres of solar panels are needed for every 1 MW of solar farm capacity. As solar farms are becoming larger in capacity, the required acreage is also increasing. Local rules may restrict the use of solar panels on the entire land. This means that additional space is required for other solar farm facilities.
Since solar leases are typically paid on a per-acre-per-year basis, having a larger land parcel can potentially result in higher earnings when leasing the land to a solar developer.
Before determining the buildable acreage for a commercial solar farm, it's crucial to account for exclusion zones. These are areas where solar equipment cannot be placed due to various reasons. Some common exclusion zones include topography, dwellings, flood zones, waterways, wilderness areas, national parks, state parks, hazardous sites, NFS Land Units, and grasslands.
By removing these exclusion zones from the total acreage, you can determine the actual "buildable acreage" suitable for a solar farm. LandGate provides accurate information about the location of exclusion zones on your parcel(s) and offers a calculation of the buildable acreage.
It's worth noting that the presence of obstacles on the land, such as trees, can increase the costs and time required for solar energy developers to clear the site. This, in turn, could potentially affect the lease offers for your land. Solar developers are generally more inclined to pay higher rates for land that is clear of trees and structures.
Although some developers may consider timbering trees for construction purposes, it is not a common practice. Additionally, land that is bordered by a road tends to be more desirable to solar developers as it facilitates easier construction and maintenance of the solar farm.
Property Modifications for Solar Installations
When solar panels are installed on a property, a lot of the acreage is used to house those panels. Depending on the size of the solar project and the terms in the lease agreement, energy developers can make modifications to the property. Landowners shouldn’t have to worry about making any modifications to their property.
However, it is good to understand how much the usage of that land will change once solar panels are installed. This is also dependent on the terms of the solar lease but typically the land surrounding and land being used for the solar panels cannot be used for usual business. There are options where systems like agrivotaics can be installed on the property for property owners to continue to utilize their farmland. More often than not, the land will go unused except for the solar project.
It is also important to know that when the solar lease is complete, the energy developers are responsible for taking down the solar energy system. If there is any damage to the solar panel system from storms, for example, the developers are the ones responsible for making sure the panels are fixed.
Which One: PPA or a Solar Lease?
A Power Purchase Agreement (PPA) and a solar land lease are both arrangements commonly seen in the renewable energy industry, particularly concerning solar energy. While they share some similarities, understanding their differences is crucial.
Let's start with a solar land lease. In this arrangement, a solar energy developer pays the property owner a fixed rate (typically per acre per year) to install solar panels on their land to generate solar energy. The electricity produced by the solar panels is usually sold to the local utility company. In this scenario, the property owner is generally not involved in Power Purchase Agreements (PPAs), as those are agreements made between the renewable energy company and the utility company.
Now, let's dive into the distinction between a solar lease and a PPA when it comes to residential solar systems. In a solar lease, you, as the homeowner, pay a fixed monthly rental fee for the privilege of using the solar system installed on your property.
On the other hand, with a PPA, you pay a predetermined rate per kilowatt-hour (kWh) of solar energy that you consume from the panels. In a PPA, the developer assumes the cost of installing the solar system and sells the solar power to you at a fixed rate. Essentially, instead of leasing or purchasing the solar system, you only pay for the amount of energy you consume.
It's important to note that neither solar PPAs nor solar leases offer a path to owning the solar system. In both cases, a third-party owner typically takes responsibility for all maintenance and repairs.
Now, let's explore the relevance of PPAs to the real estate industry. With the increasing growth of green energy development across the United States, the real estate and renewable energy sectors are becoming more intertwined. Property owners often receive lease and purchase offers from renewable energy developers who wish to utilize their land for renewable energy projects, such as solar farms or wind farms.
Real estate agents play a vital role in this process, as they need to understand the fundamentals of Power Purchase Agreements (PPAs) and renewable energy concepts, enabling them to effectively guide their clients through the leasing or selling of their land to renewable energy developers.
By comprehending these differences and understanding the role of PPAs in real estate, industry professionals can better navigate the evolving landscape of renewable energy and provide valuable guidance to landowners.
List Your Land for a Solar Lease
The best way to determine your chances of getting a solar lease on your property is to list your land for free on LandGate’s unique marketplace which puts your property in front of high intent buyers and lessors! The process of listing your property has never been easier and there is zero commitment to listing your property. The market is the easiest way to determine your property’s potential to receive a solar lease offer. Get started now!
