5 Questions You Should Be Asking Before Leasing Your Property for Solar

So, you’re a landowner. And one day, out of the blue, you get a call from a company telling you they’re interested in leasing or purchasing your land to develop a solar facility. The rate seems pretty attractive, but does the whole idea seem a bit too good to be true? Perhaps…

As a manager who has overseen the execution of 600 of these types of leases across 12 states, I can tell you there are some important questions that aren’t being asked. So, I’ve compiled a list of the top five questions landowners should be asking before leasing or selling their property for a solar project:

1. Is that really the actual dollar amount I’ll receive?

The eye-catching number is usually the above market lease rate. In some areas, developers are paying more than $1,000 per acre per year for farmland that you may have been leasing for $250 per year. However, due diligence periods can last two to three years with very little money at risk. Some developers will offer nothing, with the justification that the utility applications are expensive and they want to focus their investment on project development.

It’s true that it takes a while to achieve an interconnection agreement with the utility and there are significant costs involved, BUT it’s certainly fair that a landowner should receive some option money for the time. If nothing else, $1,000 to $2,000 per year is enough to ensure the developer is taking your project seriously. Remember, money talks, so ask for some of it up front.

2. Is the developer reputable?

What many landowners don’t know is that there are numerous small companies with little money and resources who will sign a lease option, then immediately sell the project to a bigger developer. While this isn’t always a bad thing, – because the little guys have great personalities, and like to hustle – you’re introducing a middleman who will be taking a big bite out of the profits and doesn’t have all the information.

So, make sure to look for companies who are designed to develop AND HOLD these projects long term. The best way to check on this is to ask how many projects they’ve constructed and how many they currently own! Also, check on the assignment language in the lease, and make sure that the developer can’t just flip the contract to anyone they choose. If you press them on it, legitimate developers will agree to some limitations or remove the clause altogether.

3. Should I lease or sell? Or both?

I’ve heard countless landowners say they have more interest in selling their properties rather than entering a long-term lease. Developers are happy to accommodate, assuming you will accept a low option premium and give them time to complete their interconnection and permitting before closing. However, what landowners don’t think about is that if you enter a long-term lease AND the project gets developed, then you can sell your property with the project on it as an investment property with a long-term revenue stream backed by a utility company.

For example, let’s say your property is worth $5,000 per acre for farming, and the developer wants to pay you $10,000 per acre for a purchase option. You may be able to get $15-$20,000 per acre if you go the lease route, then later sell the property to an investor.

4. Should I wait?

If you’ve ever seen the movie, “There Will Be Blood,” you’ll remember the scene at the end where Daniel Day Lewis is explaining to a man – who thought his property was valuable for oil deposits -that it is was worthless due to drilling on surrounding properties that extracted all the oil from under his land. Solar projects are not much different than the man’s situation in that the power needs to run through a substation, and substations can only handle so much power.

So, if you have a neighbor up the street who leases their land and an application is filed ahead of you, then they may take up all the power on the property, rendering your land useless for solar. Of course, you need to do your due diligence, but these offers have a timeframe.

5. Should I shop around?

When the solar craze hits your area, it may seem like the gold rush and you’re sitting on the mine. You may be tempted to shop around for the highest lease rate, but beware! The solar power purchase agreements issued by the utilities are often awarded by competitive bid. If the land lease rate is too high, then the project cost increases. This will then require the Power Purchase Agreement (PPA) rate to be higher and bump the project out of contention.

Legitimate developers will recognize this and limit the rate they’ll pay. But often, it’s the smaller developers who will pay whatever it takes to tie the project up, only to have it sit on the sidelines when the awards are announced. The best way to get around this is to do your research on the developer. And just like with any company, a successful track record is usually the best indicator.

Always make sure to do your research beforehand and keep these five questions in mind when deciding whether to lease or sell your property for a solar project. If you’re already an owner of a project, NLR Commercial has resources to connect you with a list of qualified buyers. Our leading real estate firm has identified and secured over 600 properties since 2013 for lease options.

If you’re a landowner interested in having your property evaluated for solar or looking for the perfect buyer, please contact us for a free site evaluation.

Why are Substations Important?

Solar energy development is gaining ground in the United States, and with good reason. It provides clean energy and reduces the user’s carbon footprint. It makes sense that many landowners would be excited about the idea of using a portion of their property as a solar farm, but there are many factors that come into play in terms of a project’s viability. One of these factors is appropriate substation access.

What are substations, and why are they important?

With any source of electricity, whether a traditional electrical plant or a utility-scale solar system, substations serve an important purpose. While a house needs roughly 120 volts of electricity to operate safely, transmission lines from power plants can carry extremely high voltage. A transmission line may have 34,500-500,000 volts running through it, and if all that power were to flow into one house, the results would be deadly. A substation serves to step up power to high voltages for travel between long distances and steps down the power to a safe voltage for human use at the commercial and residential level.

An electrical substation converts voltage from high to low thresholds, or low to high, which is vital because voltage varies significantly. This type of facility is designed to regulate energy throughout a certain region, sending power back and forth from suppliers to consumers. Solar farms use solar panels to utilize energy from the sun and then take that power and send it out to homes and businesses throughout the area. Many think of it like a switching station that the utility can control.

If you’re trying to develop your property for solar use, you’ll need a substation or transmission lines nearby, depending on the size of your property. When the infrastructure is located far away, a dedicated line, called a generation tie, will have to be constructed, at a cost of about one hundred dollars per foot. Because this cost is paid by the developer, a solar project that is far from a substation is not going to be as appealing as one that’s closer and more cost-effective.

It can be complicated to get into solar development, but it helps to partner with a company with expertise in the field. NLR Solar is a Division of National Land Realty (NLR), which is the most innovative and fastest growing land consultant firm in the United States. With our extensive access to the NLR agent network, we can help inform potential landowners about their property and connect them with developers that can maximize its value.

Connecting landowners with developers helps both parties make the most of their resources. Acting as mediator between developers and landowners, we work to smoothly and successfully integrate solar development, benefiting not only those directly involved but also the environment.

If you’re interested in being part of this exciting new push toward sustainable energy, contact us today!

Could Solar Power Help Save the World?

You have probably heard politicians and climate change experts bemoaning the future of our planet. Many argue that humankind has waited too long to take action, and now there is only the “slimmest of opportunities remaining” to avoid total environmental chaos. But it might not all be doom and gloom after all, thanks to solar power.

Greenhouse Gas Emissions and Climate Change

Fossil fuels are a major source of greenhouse gas emissions that trap heat and send the earth barreling toward 2.7 degrees F above preindustrial temperatures—the point of no return that could make it impossible to get the climate back to normal.

Fortunately, switching to renewable energy reduces greenhouse gas emissions without asking society to return to the Stone Age. The idea that people could rely primarily on renewable energy isn’t naively optimistic—it could actually work thanks to the falling costs and skyrocketing installation rates of solar panels.

Falling Solar Prices

Starting in about 2016, solar prices suddenly started to drop. It rapidly went from being one of the most expensive energy sources to one of the cheapest. Today, producing one megawatt-hour (MWh) of electricity using solar photovoltaics (PV) costs about $50 compared to $102 for coal.

In 2009, it cost $350 for PV energy, while coal remained around $102. This clearly indicates that the time of solar has arrived, which is great news for the entire planet!

Skyrocketing Solar Installations

Power producers have been responding to lower costs with an explosion of solar projects. Indeed, the US increased its solar power capacity by about 50 percent in just the past two years, now totaling over 100 gigwatts (GW). If the exponential growth of solar continues—along with the corresponding phasing out of fossil fuels and accelerated transition to electric vehicles—greenhouse gas emissions could possibly fall at the rates needed to avoid the worst impacts of climate change.

Now is the Time to Act!

The mainstream view is that it’s already too late to decarbonize the atmosphere fast enough to avoid permanently rising temperatures and trouble for the earth’s oceans and wildlife. But remember that just a decade ago, the current plateauing demand for coal and plunging solar prices were also outlandish. That’s why you should never say never—and stop waiting for others to drive change!

If you’re a landowner, you have the opportunity to make a positive impact on the climate by putting unused acreage to good use as a solar farm. Not only can this decision help save the world, but it can put good money in your pocket as well. Many solar developers are willing to offer lease fees that far exceed the per-acre earnings from traditional farming and ranching.

For help negotiating and navigating what can be a complex process with potential solar developers, turn to NLR solar. We have been helping landowners sign fair, profitable solar farm leases since 2014.

Determining your site’s solar suitability is the first step, so contact us today to schedule a free, comprehensive evaluation.