Solar power is experiencing rapid growth as a renewable energy source in the United States. According to the U.S. Department of Energy, solar energy is not only the fastest-growing source of renewable energy, but it is also the most cost-effective means of generating new electricity in the nation.
To contribute to the solar energy boom, property owners can lease their land for solar farms, which comes with many benefits and a few potential drawbacks that must be considered. Although there are many benefits to leasing land for a solar farm, there are also drawbacks that property owners should consider before deciding to lease their land for solar panels.
Key Takeaways
No Upfront Costs: Property owners incur no initial expenses as the solar company covers installation and maintenance costs.
Guaranteed Income Stream: Leasing land for solar farms provides a steady income, typically ranging from $700 to $2,000 per acre annually.
Limited Risk and Liability: The solar company assumes responsibility for installation and maintenance, reducing the landowner's risk.
Environmental Contribution: Leasing land supports clean energy production, aiding in carbon footprint reduction.
Potential Land Use Loss: Leasing may restrict land use for other purposes, though some agrivoltaic uses like grazing may still be possible.
Uncertain Payments: Payments aren't guaranteed if the solar company ceases operations, though upfront lump-sum options exist.
Long-Term Commitment: Leases often span 20-40 years, requiring careful consideration and due diligence by property owners.
What is a Solar Lease?
Solar leases are long-term legal agreements between a landowner and a solar energy company. The property owner grants the solar developer the right to install and operate solar panels on their property. Then, the developer typically sells the electricity generated by the solar panels back to the utility company. The landowner receives regular annual lease payments from the solar developer in exchange for allowing the use of their land.
Pros and Cons of Leasing Land for Solar Farms
Leasing land for solar farms is an increasingly popular option for property owners looking to contribute to clean energy production and capitalize on the renewable energy boom. However, there are many pros and cons of leasing land for solar farms for landowners considering this sustainable yet complex opportunity.
Solar energy leases have really taken off in states where tax incentives are great for renewable energy developers. California offers property tax exclusions for solar energy land development which adds value to a property. Massachusetts offers the Solar Massachusetts Renewable Target (SMART) program that provides financial incentives to solar developers based on solar energy production. Solar energy leases in these states with tax incentives benefit both the property owner and the renewable energy developer.
Some of the pros of leasing land for solar farms include no upfront costs, a guaranteed income stream, limited risk and liability, and the satisfaction of contributing to clean energy production. However, it's not without its drawbacks. Lease payments may not always be reliable throughout the entire lease period, land usage can be restricted due to the presence of solar panels, and the agreements are often long-term commitments.
Pros of Leasing Land for Solar Farms
Due to the numerous advantages, many property owners are choosing to lease their land for solar farms. The main benefits of solar leasing include:
No upfront costs: One of the main advantages of solar leasing is that there are no upfront costs for property owners. The solar company will cover all the costs associated with installing, maintaining, and operating the solar panels on the leased land.
Guaranteed income stream: By leasing land for a solar farm, property owners can secure a steady income stream throughout the solar projects through solar lease payments. The amount of these payments ranges based on many factors, but property owners are generally paid $700-2,000 per acre per year.
Limited risk and liability: Since the solar company is responsible for the installation, maintenance, and operation of the solar panels, property owners have limited risk and liability. This means that in the case of any accidents or damages, the solar company is responsible for covering the cost of any damages.
Contribute to Clean Energy Generation: By leasing land for a solar farm, property owners are contributing to the production of clean and renewable energy, reducing their carbon footprint and helping to combat climate change. Not only do solar leases benefit the environment, they also have many benefits for property owners.
Cons of Leasing Land for Solar Farms
Although there are many benefits of leasing land for solar farms, there are a few potential disadvantages that property owners should be aware of, including:
Potential Loss of Land Use: A disadvantage of leasing land for a solar farm is that it may take away the ability to use the land for other purposes during the term of the lease, depending on what the landowner negotiates with the solar developer. During a solar lease, the property owner may still be able to use their land for grazing or crops (also referred to as 'agrivoltaics').
Payments are NOT Guaranteed: The solar company can stop operating the solar farm at any time due to many reasons, meaning that solar lease payments are not guaranteed to continue for the entire term of the solar lease. However, property owners can sell their solar lease payments up front for a lump sum to mitigate this risk. When a property owner decides to sell their solar lease payments in exchange for a lump sum upfront, the purchaser assumes the risk of potential payment discontinuation.
Long-Term Commitment: Solar leases are typically long-term agreements, ranging anywhere from 20-40 years. Although the long-term nature of solar leases is not necessarily a drawback to leasing land for a solar farm, it is a major consideration that property owners need to keep in mind as they consider solar leasing. Given this information, property owners must conduct thorough due diligence to ensure that a solar land lease offer aligns with their needs and goals.
How to Lease Land for a Solar Farm
There are many factors for property owners to keep in mind as they consider leasing land for a solar farm. Evaluating the potential pros and cons of solar leasing is one of the considerations that property owners should keep in mind as they consider whether or not they should explore land lease agreements with a solar developer.
Traditionally, property owners have gotten solar lease offers through unsolicited outreach from solar energy developers. If you are interested in learning your land's value for a solar farm and exploring solar lease offers, consider listing your property for lease for free on LandGate's online marketplace. Solar developers use our data to plan new projects and find land to lease through the marketplace. Listing is completely free, and property owners are NOT obligated to accept ANY offers that they receive through their listing. Listing starts by generating your free report on our map:
