How Much Can I Make from a Solar Lease?

In the realm of solar energy endeavors, the initial exchange between a developer and a landowner carries more significance than one might think. It’s a moment where potential takes shape, as the developer’s letter to the landowner not only outlines the potential earnings from leasing the land for solar development but also underscores the commitment to a mutually beneficial partnership.

Delving into the intricate dance of economics, this blog uncovers the key factors that weave into project profitability, dictating the proposals a developer extends to a landowner.

Local Market

Location is one of the most important factors in valuing a development. Some states offer incentives for green energy development, including tax credits. Federal programs also offer tax credits and solar renewable energy credits, which are very valuable, especially in states committed to increasing their renewable energy investments.

Location also factors into scarcity, which increases value. In areas with high population density, there is generally less available rural acreage; that acreage is also in demand as residential or recreational property, so landowners in these kinds of areas receive higher offers. Additionally, the land’s proximity to the nearest substation factors in, since parcels that are closer to substations lower costs for developers.

If the local area has restrictive zoning or land use issues, or requires extensive environmental impact studies, the project will be more expensive and take more time to develop, making parcels less valuable to developers.

Type of Project

Size can make a difference in how high the offer for the land parcel is. Distributed Generation (DG) projects are smaller projects, usually 5 – 50 acres in size. These smaller projects generate power to a substation that provides electricity to residential neighborhoods and are located close to the community they serve. As a result, these projects are more lucrative and developers will often offer landowners a higher lease rate for these projects.

Transmission Scale projects are bigger projects (200+ acres) that feed into high-tension lines to distribute larger amounts of energy over longer distances. Utilities tend to negotiate discounted rates for this energy, so these projects are slightly less profitable for developers, resulting in a more limited offer to the landowner.

Environmental Factors

While the number of available acres is important, every site has features that make it easier or more difficult to design an efficient grid of solar panels. Land that is prone to flooding, unsteady, sloped, or hilly is more challenging for developers.

Land with many obstructions that need to be removed, such as trees, bushes, or debris, will also make development more expensive and impact the offer a developer is willing to make to a landowner.

Local Utility and Other Buyers

Finally, the developer must negotiate terms for sale and transmission of the power generated by the project. The developer files an Interconnection Application with the local utility – this is the agreement that shows the developer how much interconnection will cost them if they build the project, and ultimately allows them to model the project’s feasibility. The approval process can take up to two years. 

At the same time, the developer is negotiating a Power Purchase Agreement (PPA) with either the utility or another power buyer who would be buying the clean energy through Renewable Energy Credits (RECs).

All these factors go into the offer a developer makes for your land. Your decision to lease will be based on comparing how much you’re earning per acre currently and what other options you have for selling or leasing the land. According to Clay Cooper, a Director of Land Acquisition for NLR Solar, “Most landowners realize three to four times more earnings per acre from a solar development lease than they do from cash crops. Of course, if the land is sitting vacant, the solar development will provide significant revenue where there is none now.”

To discover how much your acreage might be worth, contact us. Our team has negotiated over 1,000 land agreements and acts as an interemediary between developers and landowners to the benefit of not only the parties involved, but to the community and environment as well.

How Do Developers Maintain Solar Projects?

One of our most frequently asked questions from landowners centers around solar farm maintenance. What do developers do to maintain the project, and more importantly, the grounds beneath the panels? In a recent video, NLR Solar’s CEO, Nathan Fabrick, speaks to the precautions qualified developers take to manage the land and panels, without the use of harsh chemicals.

You can access the full video below:

Acting as an intermediary between developers and landowners, NLR Solar seeks to create satisfactory arrangements that most benefit our communities and our environment. Further questions? Contact us for more information. 

How Much Land Does a Developer Intend on Using for Solar?

One of our most frequently asked questions from landowners focuses on the idea of scale: How much of my land will a developer use for a solar farm? And why can’t they tell me the amount up front? In a recent video, NLR Solar’s CEO, Nathan Fabrick, explains the process developers encounter when planning solar development projects and why estimating project size isn’t always straightforward.

You can access the full video below:

Here at NLR Solar, we act as an intermediary through which developers and landowners can come to an agreement that benefits both the community and the environment. If our service is of interest to you and you have further questions, contact us for additional information!

Understanding the Solar Development Process

After being in the renewable energy space for the better part of a decade, our team has seen plenty of profitable solar agreements met between landowners and developers. With that said, these agreements take time and diligence in order to be properly executed. One of the main concerns landowners have when entering a solar lease is the time investment it takes to get a project off the ground. What is involved in the due diligence period? What are the developers doing before, during, and after the panels are installed?

We’re pulling back the curtain and detailing the entirety of the solar development process and what developers do to ensure a successful project. Here’s what you, as a landowner, can expect.

At NLR Solar, once we determine that a landowner is interested and the land is viable for a project, we create a marketing package and look for a suitable developer. This can take up to two-three weeks. 

Finding a Developer

Once we find a developer interested in the property, the developer has the exclusive right to the development; we do not offer the opportunity to multiple developers. The developer will then send a Letter of Intent (LOI), a document that sets out the terms of the agreement between you and the developer. The terms will include the payments during the option period, the lease payments once construction begins, and the lease length (usually 20 – 25 years) with options for extensions and other terms.

Negotiation of the terms between the landowner and developer is typically complete within a week or so. The lease document must be signed by both parties in order for the developer to apply for permitting and start negotiations with the local utility.

Leasing Details

The option period and diligence period can take between two-five years. You receive payments during this time as compensation for holding the option on the property. You can continue to use the property for any purpose and own cash crops. Although, no new structures can be built. 

The diligence period overlaps with the option period. The developer is obtaining permitting, negotiating with the utility or power offtaker for the sale of power, and ensuring the land has everything needed for a successful solar project. They’ll be performing environmental impact, wetlands, and endangered species studies. They’ll also obtain financing for the project.

The developer files an Interconnection Application with the local utility – this is the agreement that shows the developer how much interconnection will cost them if they build the project, and ultimately allows them to fully model the project’s feasibility. The approval process can take up to two years. 

Concurrently, the developer is negotiating a Power Purchase Agreement (PPA) with either the utility or another buyer of the power who would be buying the clean energy through Renewable Energy Credits (RECs). For community solar projects, the ultimate buyers of the power may look a little different than just a single entity, but it is also during this time that the developer fully models out revenue associated with the project based on the program within which it’s working.

Going LIVE

When the Power Purchase Agreement is signed, permitting has been approved, and all the requirements are met, the developer will receive the Notice to Proceed (NTP). This is the document confirming the project is ready to begin construction. When the developer takes over the property and pays rent, you’ll receive the lease payments annually or bi-annually during construction and the life of the project.

The life of a solar development is 25 – 40 years. The utility and the developer will have options for four to five-year extensions after the first term of the contract is over. The solar panels’ useful lifespan is 40 years.

Decommissioning

After the agreement ends or the panels have reached the end of their useful life, the project will be decommissioned. Dismantling the solar array is relatively quick; there is almost no underground infrastructure, just poles and panels to pull up and dispose of.

There is no danger of toxicity after the project is dismantled, and you can take back and use the land for any purpose.

Solar development requires time and investment. Which is why pairing with the right developer is so important. NLR Solar helps inform landowners of the potential for their property and connects them with developers that can maximize its value. Acting as mediator between developers and landowners, we work to integrate solar development, benefiting not only those directly involved but also the environment and communities served.

If you’re a landowner and wondering if a solar lease would be the right fit for your property, contact us today for a complimentary site evaluation.

What if my Solar Development Partner Goes Bankrupt?

One of our most frequently asked questions from landowners surrounds the risk of bankruptcy in solar development companies. What if the solar developer partner you have goes bankrupt? What happens to the project? Are panels left on your property? Will you still receive rent payments? NLR Solar’s CEO, Nathan Fabrick, assuages these concerns and breaks down the details of power purchase agreements.

You can access the full video below:

Here at NLR Solar, our team is dedicated to identifying sites for solar projects and securing land agreements with the country’s top solar developers to the benefit of both our communities and our environment. Contact us for more information. 

How Does a Solar Project Affect my Property Taxes?

One of our most frequently asked questions from landowners regards property taxes. Should you be concerned that your property taxes will increase as a result of a solar project on your land? If so, will you be responsible for paying that difference? NLR Solar’s CEO, Nathan Fabrick, answers these questions and more!

You can access the full video below:

Our team at NLR Solar is dedicated to identifying sites for solar projects and securing land agreements with the country’s top solar developers. Hoping to benefit both our communities and our environment, we act as mediators between land owners and developers seeking to come to an agreement. Need more information? Reach out to us here!

What Happens at the End of My Solar Lease?

One of our most frequently asked questions from landowners revolves around the idea of decommissioning – the process of removing solar panels at the end of a property’s lease term. What can landowners come to expect at the end of their lease term? What assurance do they have that developers will remove the panels from their property? NLR Solar’s CEO, Nathan Fabrick, tackles these questions.

You can access the full video below:

Here at NLR Solar, our team is dedicated to identifying sites for solar projects and securing land agreements with the country’s top solar developers to the benefit of both our communities and our environment. Reach out to us for further information! 

Glossary of Terms for Solar Projects

Battery Energy Storage Systems (BESS): Structures that look like cargo containers that store solar-generated energy for use later. They may be located on solar farms along with panels and must be close to substations. 

Decommissioning: The process of removing solar panels at the end of a property’s lease term, usually at the end of life for the solar panels. Generally, there is very little infrastructure to remove – just poles and panes, and the land reverts to its previous use. There is no danger of toxic waste or damage to soil.

Diligence Period: The period overlapping with the option term during which the developer is obtaining permitting, negotiating with the utility for the sale of power, and making sure the land has everything needed for a successful solar project.

Distributed Generation (DG): Term used for smaller projects (also called solar gardens). Usually five to fifty acres in size, these smaller projects generate one to twenty megawatts per hour to a substation that provides power to residential neighborhoods.

Gigawatt (GW): A unit of power equal to one billion watts.

Interconnection: The process of connecting a solar project to the power grid. This often happens by connecting the project to a substation or via 3 phase power lines that are in proximity to a substation. This is the essence of the agreement with the local utility agreeing to buy the power. Upgrades needed to connect the solar project to the grid are the responsibility of the developer.

Kilovolts (KV): Represents one thousand volts. Typically used when referring to the voltage of transmission lines.

Lease Term: The length of the agreement between a developer and landowner for rent of a solar project.

Megawatt (MW): A unit of power equal to one million watts, especially as a measure of the output of a power station.

Megawatt-Hour (MWh): A megawatt hour (MWh) equals a thousand kilowatts of electricity generated per hour and is used to measure electrical output. In general, megawatts are used to calculate how much a power plant generates or how much electricity is consumed by a particular area, such as a city, state, or country. 

Notice to Proceed (NTP): This is the document that indicates that a project is fully entitled and ready to begin construction. This is the time when the developer takes possession of the property and begins paying rent to the landowner.

Option Premium: The funds paid to a landowner during the development timeline of a project before the project is approved – typically paid out quarterly or annually. This is the deposit that holds the land until the project is ready to launch, which can take two to four years.

Option Term: The length of an option agreement, usually estimated between two to four years. The landowner can continue to use the property for any purpose during this time and owns any cash crops that might be raised and harvested. 

Photovoltaics (PV): PV materials and devices convert sunlight into electrical energy. A single PV device is known as a cell. An individual PV cell is usually small, typically producing about one or two watts of power. In order to withstand the outdoors for many years, cells are sandwiched between protective materials in a combination of glass and/or plastics. To boost the power output of PV cells, they are connected together in chains to form panels.

Power Grid: The collective term for infrastructure that transports power from one place to another, including power lines and substations.

Power Purchase Agreement (PPA): The agreement from a utility to purchase power from a solar developer at a fixed rate over the course of a longer-term contract (usually 20 years). The agreement may have shorter extensions available at the end of the initial term, as solar panels have an average lifespan of up to 40 years.

Solar Array: The panel configuration in a field for a solar project.

Substation: A station in the power grid that changes voltage from one level to another. For example, bringing power from high tension lines down to distribution lines which feed directly to homes.

3 Phase Power (3PH): Distribution lines that often have three wires and supply power directly to residences.

Transmission Scale/Utility Scale/Grid Scale: The terms for large projects (200+ acres) that feed into high tension lines to distribute larger amounts of energy over longer distances.

If you’re a landowner and interested in how these solar terms affect you, your land, and your community, please contact us. NLR Solar is dedicated to simplifying the approach to lease your land for solar. Our team is happy to help you recognize your land’s potential and conduct a complimentary site evaluation.

Why Solar Parks Are in Desperate Need of Good Publicity

NLR Solar’s Nathan Fabrick was invited by POWER, a news and technology outlet for the Global Energy Industry, to weigh in on the controversy and misinformation that surrounds the rather “unloved” solar industry. Despite the tax revenue that solar farms produce and the continued decrease of installation costs, communities are still experiencing a strong NIMBY (not in my backyard) movement. Fabrick highlights the need for education and local government support when considering the presence of solar in our communities.

Read the full article below to see how he addresses the NIMBY phenomenon:

View the Article

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 Dedicated to finding the most beneficial solution to community and environment, NLR Solar works to identify sites for solar projects and secure land agreements with the country’s top solar developers. We act as an intermediary between developers and landowners to the benefit of not only the parties involved but also the community and environment as well. If you’re interested in learning more about what NLR Solar can do for you and your community, give us a call at (904) 906-4113, or contact us for a complimentary site evaluation!

Is Your Land Right for a Solar Project?

There are over 2,500 solar farms in the U.S., ranging in size from a few dozen to hundreds of acres. Solar farms produce clean energy that helps communities lower utility costs and landowners generate stable income over decades. If you’re a landowner considering a solar farm lease, here’s what you’ll need to know.

What You Need

First, you must have the right land. Some governing authorities regulate how large solar farms can be, but generally, companies look for at least 30 acres up to a few hundred, which allows for transmission-scale projects. The land must be flat and ideally, have a compact regular shape, which allows for a more efficient design of the panel arrays. Annual snow and rainfall are not factors, but the land must not be in a designated flood zone or jurisdictional wetland. For 30-100 acre solar farms, the land must also have access to power lines and be a reasonable distance from a substation, usually within three to five miles.

If your property is being farmed or has an agricultural tenant, you’ll have plenty of time to give notice and make changes. It takes months, sometimes years to get a project approved and ready for actual development, and you’ll have full use of the land and the profit from it until the project gets underway.

Profitability

Leasing to a solar farm tenant will almost certainly increase your profitability; we find that landowners average up to six times what they were earning per acre from a cash crop. The risk for the landowner is reduced dramatically, as well; most leases are 25 – 40 years and the revenue won’t be threatened by weather, changing market pricing, or subsidy policies.

Landowners have some legitimate concerns about the value of their property and the reaction they’ll get from their neighbors and visitors to the area. Mitigation issues are under the control of city or county boards. They’ll be able to create policies that ensure the land is managed using environmentally sound methods and that neighboring properties retain their value. They can require borders around the property to create natural visual barriers. Getting zoning and other legal permissions will be the work of the tenant company; all they ask is that the owner be publicly supportive of the project.

Clark Merritt, NLR Solar’s VP of Land Acquisition, says solar leasing is a win/win for almost any rural landowner. “It’s a great way to diversify land use and create value from land that’s currently vacant or not suitable for the crop you want to grow. Beyond the obvious financial benefit over several decades, landowners can be sure that the land remains viable for the future. The panels are generally secured to steel I-beams in the ground, the topsoil remains intact, and the project is designed for the land to be used again for agriculture, keeping the soil composition at the forefront.”
 
Solar projects benefit the community as well, especially when compared to other kinds of developments. They’re quiet, they don’t generate any traffic, and they add valuable tax revenue for public use, which is welcome in areas where tax revenue and population may be declining. Site construction and maintenance create local jobs. Solar is the fastest-growing energy source, and you can be proud to be part of the clean energy movement.
 
If you’re wondering if a solar lease would be the right fit for your property and would like a complimentary site evaluation, contact us today.