What Should Landowners Know About Solar Farm Development in Utah?
Utah has been experiencing significant growth in the solar energy sector due to its abundant sunlight, supportive policies, and increasing investments in renewable energy infrastructure. The state's solar market has seen rapid development, making it a key player in the U.S. solar industry. In 2024, Utah currently has over 3000 MW in installed solar capacity and generation for utility-scale solar has rapidly expanded from just 0.1% of the state's generation in 2015, to more than 11% in 2024.
The state is home to several large-scale solar farms, including the Milford Solar Project and the Sigurd Solar Project, which collectively generate hundreds of megawatts of electricity. Additionally, there is a growing trend of rooftop solar installations in both residential and commercial sectors, driven by incentives and declining costs.
Utah offers various incentives to promote solar energy, such as the Renewable Energy Systems Tax Credit, providing a credit for the purchase and installation of solar systems. The state's net metering policy allows solar panel owners to receive credit for the excess electricity they generate and feed back into the grid.
However, challenges such as changes in net metering policies and the integration of large amounts of solar energy into the grid require upgrades and modernization of the grid infrastructure. With its high solar potential and supportive environment, Utah is well-positioned for continued growth in the solar energy sector.
Advances in solar technology, energy storage, and grid management are expected to further enhance the viability and adoption of solar energy in the state, making Utah a model for other states in the transition to renewable energy sources. Many solar developers are actively planning new projects across the state. This presents a great opportunity for landowners to earn a steady stream of income from their land through solar lease payments, also known as solar payments.
Landowners in Utah are receiving offers from developers to lease their land for solar farms. They often wonder how much their land is worth for a solar farm and if they are receiving a good offer. Leasing land for solar farms helps landowners provide their future generations with long-term financial stability. Several factors go into solar farm valuations that landowners and realtors should consider.
LandGate is a marketplace that provides data intelligence to landowners while also providing them the opportunity to connect with Utah solar developers. Traditionally, developers would knock on landowners' doors or cold-call them. This old-fashioned way is not easy for landowners. It can be perceived as unwanted solicitation at a time when the landowner is not ready and doesn’t have enough information to feel comfortable talking about a solar farm on their land.
LandGate provides useful data to landowners or to their agents to inform them for free about the value of their land for solar farm leasing. Equipped with more information, landowners can make good and fast decisions about pursuing a solar lease.
What is the Process for Leasing Land for a Solar Farm in Utah?
Step 1: Solar Lease Negotiation Period in Utah
The solar lease negotiation process is the first step landowners take when interested in having a solar farm on their property. Land professionals can assist landowners during this period to make sure they are receiving the best deal possible but also understand the time period between signing the lease and having an active solar farm on their land.
During the negotiations, landowners can negotiate solar lease payments, the length of the lease for the solar farm, and the percentage of the escalator is to combat inflation.
Step 2: Solar Lease Option Agreement in Utah
The next step is for the landowner to get a solar farm option agreement. At that point, the solar developer has done a preliminary study, also called a feasibility study, to know if the site is potentially suitable for solar farm development.
Why Can’t I Get a Solar Lease Agreement Directly?
The process of a solar farm project in Utah begins with optioning the land, which is called “site control” by developers. The reason solar developers cannot go straight to a solar lease is that they have to evaluate the land thoroughly.
Typically the initial screening study is good enough that this first due diligence process is all that is needed. Another larger uncertainty for solar developers is to know if the solar project will be accepted by the utility on the electrical infrastructure (or electrical network). We refer to this phase as “utility’s application” in the graph above and developers refer to this phase as “queue submission”. This means that the solar project enters the interconnection queue of that region waiting for regulatory approval.
These queues are known as Independent Systems Operator (ISO) or Regional Transmission Organization (RTO).
During this period, the analysis of possible engineering and land factors is conducted to determine the feasibility of the project to be constructed and connected to the grid. This is the reason why the solar developer starts with an option, as not all solar projects are approved by the ISO/RTO.
How Likely Will My Utah Solar Option Become a Solar Lease?
At the moment, about 20% of solar options become a solar lease and are built into a solar farm. Currently, the electrical infrastructure network is a big bottleneck. There are more applications of solar projects to get on transmission lines than available capacity.
However, governments are aware of this situation and are working to ease it, to foster more solar development. This means that it will likely get resolved in the next few years. The problem of available capacity applies only to utility-scale solar farm projects, which are typically greater than 5 MW capacity.
Where Can a Landowner Get More Information About the Solar Lease / Option Period in Utah?
LandGate assists landowners with determining the value of their land for a solar farm. We do this by taking into account the proximity of substations, transmission lines, and state incentives - each of which plays a role in site control.
Am I Getting Paid During the Solar Option Period?
Yes. Solar payments start during the option period but are usually smaller compared to the solar payments during the lease or construction phase of the solar farm.
Step 3: Solar Lease Agreement in Utah
Once the availability of grid capacity is confirmed, the solar project is moved to a “planned” phase. During this time, the developers will exercise the solar farm option agreement to become a solar farm lease agreement. Typically larger solar rent payments start at this time.
Step 4: Solar Farm Construction in Utah
Solar payments are phased as the project progresses. It starts with small solar lease payments during the option phase. Then it increases during the solar lease phase, it increases again during the construction phase of the solar farm, and the largest solar payment occurs when the solar farm is active and generating electricity.
How Long Does It Take to Build a Solar Farm in Utah?
Usually, it will take between 1 to 2 years to build a utility-scale solar farm. It takes less time to build a community solar farm since they are usually smaller in size.
Step 5: Active Solar Farm in Utah
After the construction has been completed, the solar farm is now considered ‘active.’ For landowners, this phase is called ‘production,’ as it signifies that their land is currently producing energy for the electrical grid that it is interconnected with. The production phase lasts anywhere from 25 to 50 years depending on what was negotiated on the lease.
What Can a Solar Farm Power in Utah?
In Utah, the average solar farm size for active farms is 240 acres generating approximately 41.9 megawatts (MW) of electricity when operating under optimal conditions. This output has the potential to cater to the energy needs of around 30,740 households as the typical electricity consumption of an average household in Utah stands at 11,940 kWh per year.
What is the Impact of the IRA and Other Factors in Utah?
Utah solar incentives have encouraged solar companies to develop more projects across the state. Additionally, favorable market conditions for electricity prices are encouraging investment into the solar sector in Utah. Landowners and real estate agents should have an understanding of these incentives and market conditions to be prepared for potential offers for solar project deals.
Inflation Reduction Act: This bill passed in 2022 and became effective at the beginning of 2023 provides incentives to reduce renewable energy costs for organizations on a business, educational institution, and state level. More specifically, in Utah, solar energy is eligible for a tax credit.
Utah Solar State Tax Credit: Although this credit is set to expire at the end of 2024, it currently allows for a 25% credit of the system cost, up to $800. This can be combined with the federal ITC for additional savings.
Sales Tax Exemption: Utah offers a sales tax exemption for solar panel systems, which can save residents 6.1% on their system costs.
Net Metering: While not mandated state-wide, many utilities in Utah, such as Rocky Mountain Power, offer net billing. This allows homeowners to earn credits on their electricity bills for excess energy their solar panels generate, though the credit rates are lower than retail rates.
Rocky Mountain Power Programs: This utility offers specific programs like the Wattsmart Battery Program, which provides rebates for installing energy storage systems with solar panels. Additionally, there are rebates of $400 per kilowatt, capped at 30 kilowatts, for solar installations.
H.B. 215 Home Solar Energy Amendments (2024): This bill introduces amendments to existing solar energy policies, focusing on increasing the compensation for rooftop solar customers and ensuring fair treatment in the energy market. It also addresses various aspects of solar energy system installations and customer protections
The combination of an increase in LMP pricing plus an increase in PPA pricing has made solar energy an attractive option for electricity generation in Utah. LMP is a pricing method used in electricity markets to determine the cost of electricity at specific locations (called ‘nodes’) within the electrical grid.
A PPA (Power Purchase Agreement) is a contract between a renewable energy developer (such as a solar company) and a power purchaser (such as a utility). Over the last three years, Utah experienced a 19.65% increase in PPA pricing and an average price LMP price increase of 74.27% (this is expected to increase by an additional 1.78% in 2025).
Rising LMP prices can make solar energy more competitive compared to traditional fossil fuels. Solar energy can offer more stability and potentially lower costs, especially when LMPs are high, thus driving interest and investment in solar projects. This stability and potential cost savings make solar an attractive alternative for utilities and large-scale energy consumers seeking to mitigate the impacts of fluctuating electricity prices.
Higher PPA prices can make solar projects more financially attractive to developers, encouraging more investment in solar infrastructure. With increased PPA prices, developers are more likely to invest in new solar projects, leading to greater availability and deployment of solar energy in the state. This increased investment further drives the growth of the solar sector, contributing to the expansion of renewable energy capacity in Utah.
The combination of increased LMP and PPA pricing suggests a favorable economic environment for solar energy. Solar energy becomes more economically viable compared to traditional energy sources due to the higher costs of conventional electricity. This economic viability attracts more investment in solar projects, leading to increased solar capacity and generation.
As the cost dynamics shift in favor of solar energy, both utilities and large-scale energy consumers are more likely to adopt solar solutions to hedge against rising electricity prices. This shift not only promotes the growth of the solar industry but also supports the transition to a more sustainable and resilient energy system in Utah.
Commercial, Community, & Behind-the-Meter Utah Solar Farms
Typically, landowners and land professionals think of solar farms as huge plots of land covered in solar panels out in the middle of nowhere. However, this usually is not the case! In Utah, solar farms are typically 240 acres, allowing about 41.9 MW of electricity to be produced under ideal conditions.
Commercial solar projects are the commonly largest energy projects being about 40+ acres of land. These solar farms usually feed their energy into the grid to the surrounding area. Realistically these solar farms can be any size as it depends on the capacity available within the grid.
Community solar farms in Utah serve energy customers directly within the same area or community. These solar farms tend to be smaller in size about acreage and megawatts. Community solar is different from residential solar as residential solar panels are found on top of rooftops. Community solar projects can be larger, it just depends on the location.
Commercial, residential, and industrial solar farms are all considered to be behind-the-meter solar farms. Behind-the-meter means that they are intended to generate power primarily for on-site consumption rather than selling it to the grid. Community solar and utility-scale solar farms generate energy that is utilized in the grid to send it to all consumers a part of that grid. This means that they are front-of-the-meter solar farms.
Discover Land’s Value For Solar Leasing in Utah
The solar energy industries within Utah are growing to achieve energy goals for clean energy development. This makes it easier for landowners and real estate agents to participate in solar development deals. Landowners in Utah can receive a free solar leasing estimate by identifying and claiming ownership of their parcel on our map.
Realtors can assist their clients in learning about their property’s potential for solar energy by using LandGate. Land professionals can utilize LandGate’s data and analytics to provide their clients with information about their resource’s potential.
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