Leasing land for solar farms can provide a steady and predictable income while allowing you to maintain ownership of the land, which is constantly appreciating in value. In this article, we will answer some of the most common questions we get from landowners about solar farms, solar panels, and how much you should expect to make by leasing your property to solar companies.
In general, 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 that is insulated from market fluctuations associated with other types of land use
Do your part in helping the U.S. to convert to cleaner energy production
How much can I make leasing my land for a solar farm?
You can find your land's estimated value for a solar lease on our website for free. Just find your property on our map to receive your free estimates within your property report!
Can you own 'solar rights'?
There are many differences between surface and mineral rights, but the right to lease land to a solar developer belongs to the surface owner, not the mineral owner. Although there has never been a legal case or a court ruling for this, legal scholars assume that the courts would hold that solar rights belong to the surface owner. In some very rare cases, the solar rights may 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 reserves the solar rights. In this case, Mrs. Jones owns the surface of the land, and Mr. Smith owns the solar rights.
Who builds solar farms?
Many companies are building solar farms nationwide, such as NextEra Energy Resources. However, your initial contact could be with a 'landman.' In these cases, the landowner must do their due diligence in case that landman is trying to lease their property for as little as possible, and then flip that lease to a solar farm developer and make a profit.
Which factors affect how much my land is worth for a solar lease?
Many factors determine the amount you get paid if you lease your land for a solar farm:
The size of your property: Larger parcels are more valuable for solar developers!
The topography of the parcel: Is your property flat? Is it on a steep hillside? Parcels with topography above 8% are difficult for solar developers to work with.
Water on or near the property: Is your land located inside a 100-year floodplain, or on wetlands? These areas are referred to as 'exclusion zones' because they cannot support solar structures.
The size of the project: Medium to large utility-scale projects typically require 100 acres or more, whereas smaller-scale projects (such as Community Solar Farms) require 5 – 40 acres.
Land values in your area
Ease of access to your property
Supply and demand for solar sites in your area
State and local incentives for solar developers to generate solar electricity in a given location
Solar Irradiance: how much solar energy does your parcel receive? Solar irradiance does affect the probability of a solar farm being built in a particular location, given that there is a need for a certain level of solar irradiance to generate electricity efficiently. Check out the map of the United States below - the dark red areas receive the strongest solar irradiance:
There are many ways that landowners can get paid when they lease their land for a solar farm. Typically, landowners receive annual rental payments ranging anywhere from $500 to $2,000 per acre per year. That can amount to a large amount of money throughout a 25 to 40-year lease term, making solar leasing a very profitable opportunity for landowners. These lease payments should also increase annually by 1 to 3%, which is called an 'escalator.' This escalator provides for the rental payments to increase gradually each year to keep up with inflation.
Most solar leases also provide an option to extend the lease for another 5 to 15 years. Depending on what you negotiate and the level of competition for land leases in your area, you could also potentially receive a signing bonus of $50 to $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 royalties, but to date, it seems that royalty provisions are being left out of solar leases.
However- receiving annual lease payments instead of royalty payments has benefits! Lease payments make it easier to plan for projected property income because royalty payments can fluctuate frequently. Additionally, landowners can negotiate more in rental/ lease payments if they do not ask for royalty payments.
What is the process like when I lease my land for a solar farm?
After you sign the solar lease, there are 4 phases to a solar farm project.
Development Phase: This phase lasts anywhere from 1 to 5 years. During this time, the solar developer does their due diligence to ensure that they can begin construction and proceed with the project as planned.
Landowners receive a small annual rental payment during this phase that typically ranges from $10 to $50 per acre. In return for this payment, the landowner is not permitted to explore other solar lease opportunities with different companies during this time.
However, the landowner can continue to use their land for grazing, agriculture, etc. There is a possibility that during this phase, the operator may be unable to move forward with a formal lease due to financial or regulatory constraints- only about 20-30% of solar lease options make it to the construction phase!
Construction Phase: This typically lasts from 2 to 4 months while they install the solar panels and supporting infrastructure.
Operations Phase: This is the phase in which the solar farm is fully operational and generating electricity. This could last 25 to 40 years or more depending on what is negotiated in the lease. During this phase, landowners are typically still responsible for paying their property taxes, and they are prohibited from doing anything else to the land that would disrupt solar energy production. You can learn more about your land during a solar lease here!
Decommissioning Phase: Unless the solar developer negotiates the right to extend the lease for another lengthy operations phase, the solar panels and supporting structures will be removed. Even though the landowner is usually never responsible for removing any of the solar structures, they must ensure that a lease agreement thoroughly addresses post-project cleanup.
What can I do with my land during a solar lease?
During the Development Phase (1-5 years) you can continue to use your land as you wish. Once the Construction Phase begins, you will be restricted from using the land they lease. The property will likely be fenced for security and liability reasons as well. Generally, the fence is a 6’ chain link.
Can I lease my land 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 land for a solar farm if someone else owns the mineral rights?
Yes, but there is a potential for problems to arise. The solar company will want to make certain that their investment in your land will not be interfered with by any potential mineral leases. 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.
However, solar companies are very diligent in understanding who owns the mineral rights under properties that they are interested in leasing, and they take time to uncover how their possible project could be impacted.
How can I learn more about solar energy?
Check out LandGate's solar resource center for landowners. The U.S. Energy Information Administration (EIA) is another great resource to learn more about solar energy, wind energy, natural gas, electricity, coal, nuclear energy, and more!
Are you interested in leasing your land for a solar farm? Publish a free listing to our competitive marketplace today! The first step is to find your parcel on our map to generate your free Property Report, which will provide you with a free solar lease estimate and the opportunity to create an optional listing:
