The Best Way To Unlock Your Passive Income; Leasing Land to Commercial Solar Farms.

If you own land and want a convenient way to earn from it, consider leasing to solar farms.No matter how expensive energy is, it’s always in demand. 

Since the world is having a global warming threat, the use of non-conventional energy sources like solar energy is getting a lot of attention. Moreover, the number of commercial solar companies capitalizing on this revenue stream is increasing.

Leasing land to commercial solar farms simply means renting your place to a company so that they could generate renewable electricity by installing solar panels on your land. This electricity is then transferred to a utility. This arrangement is made official through a land use agreement.

What Are Commercial Solar Farms?

Solar farms are large solar arrays that convert thermal energy (Sunlight) Into electrical energy, which then gets routed to an electricity grid. They are also known as solar gardens or photovoltaic (PV) Power stations. They include thousands of solar panels and they are owned by people who supply the power to their specific coverage area. 

There are 2 types of solar farms based on their customers. One is utility-scale solar farms, which have public utilities as their customers, and community solar farms, whose customers will be households. Utility solar farms have a large solar plant when compared to community solar farms.

Why Choose Commercial Solar Energy? 

After 2016 with the declining cost of solar panels, there was a rapid increase in the production of solar energy and many countries like China, the US, Germany, and Japan were among the leaders in solar installations. Even during the COVID-19 pandemic, the solar industry expanded.

In recent times governments are promoting leasing land to solar farms by including incentives and support policies for commercial solar industries. The formulation of the renewable portfolio standard is one of the most important policies of the government. It mandates the utilities to produce a predetermined portion of their electricity from renewable resources. These regulations create a stable market environment for the solar industry.

What Are the Benefits of Leasing Your Land to Solar Farms?

  • It’s an easy way to earn money with minimal effort.
  • If you are a farmer you can overcome the financial loss caused by climate issues.
  • You can attain financial stability even at times like the covid-19 pandemic.
  • Land that is not used due to climate issues can be used to make revenue.
  • You can develop a long-lasting business relationship which will be of your benefit.
  • You will have a chance to solve the environmental crisis just by leasing land to solar farms.
  • Even after leasing a solar farm, the land remains usable for other purposes. For example, leased farmlands are used to cultivate crops that won’t be a problem with solar panels.

Requirements of a Solar Farm Land

Medium-scale community solar farm land often requires 10-20 acres or more of land. Mostly flat lands are better for solar farms but a slight slope isn’t that bad. If there is a slight slope towards the south or east it can be beneficial because it can get the panels more sunlight.

The developers may do some minor ground works such as removing shrubs or leveling land. Wetlands are not considered because they will prevent solar projects from getting off the ground. Solar lands are not supposed to be on lands that are designated for preservation or protection due to the presence of wildlife habitat.

To construct a solar farm the developers should have some permits from local authorities such as land use, zoning, grading, construction, and electrical. If your land is in a jurisdiction that is under a protocol for permitting solar farms (VA, MD, DE, NJ, PA, OH, IL, MI, CA, NM, and TX) or else if you allow developers to identify appropriate permitting requirements, things will be easier. 

The solar farm should be near a utility infrastructure. Land adjacent to utility infrastructure can be used as a solar farm. Whereas for a community solar farm developers prefer to have a three-phase distribution line adjacent to the solar farm. If the solar farm doesn’t have any adjacent three-phase distribution lines the developers have to spend more money to install one and connect it to the site.

Before the construction of a solar farm, a flood risk assessment is taken to know if the land is prone to have any flood in the future. If there is a high risk of having floods then the land won’t be suitable for having a solar farm.

Things That You Should Be Aware of While Leasing Your Land to Solar Farms

Do your research on the companies that you want to rent the place. Always consider multiple companies rather than sticking to one. Check how they treated their earlier clients, and if possible talk to them. Make a  proper inquiry about their services, payments, and how they are maintaining the land.

Make sure that you are not pressured to sign the contract and have enough time to do the research. The lease rates can vary with place, local power demand rates, state and federal incentives, installation costs, site accessibility, and the amount of land they could get in nearby places. 

Have a proper idea about the payment, you should know if it is fixed for an entire year or if it depends on electricity charges, their profit. Read the contract thoroughly about all the conditions that are put forward both by you and the developer.

In some areas leasing lands to solar farms is not allowed to prevent the nuisance to your neighbors. Ensure that the local government authorities allow the construction of access roads and associated infrastructure. If you own agricultural land, the taxes may change after leasing; be sure to consider the tax implications.

Confirm that the details of insurance and liability concerns are properly addressed. For instance, if an accident happens and the solar panels are destroyed who Will be responsible for it? Will they provide insurance? All this must be answered clearly.

If your property has a mortgage, ensure your bank approves of the solar farm lease. Lease agreements are complex. It is always better that you make certain that the documents go through experienced relationship property lawyer.

It is always better to lease your land to solar farms directly to the developer than contact a broker or land agent. Because they won’t be interested in making much contact with developers. And also you Will feel more confident by leasing it directly to the developers.

Things to Consider While Leasing Farm Land to Solar Farm

Farmers need to be more aware when they lease their land to solar farms because they need to make sure that it does not affect their agriculture.

  1. Ask the developer if they can install the solar panels at places that could affect least the farmer’s agriculture. While solar panels are typically placed based on power grids and utility infrastructure, the future value of farmland may not be considered. In the most simple ways, solar panels should be placed in places with less agricultural value.
  2. The lease should accommodate any agricultural practices the farmer intends to employ. If the farmer wants to introduce a new crop can he do that? Some plants can be grown under the solar panels. Does the developer allow such cultivation? All these questions must be addressed properly. 
  3. Confirm the soil erosion and stormwater control measures they would implement, and inquire thoroughly about the insurance coverage necessary for potential natural calamities affecting both the land and the solar panels. 
  4. Ask them specifically if they could meet the environmental regulations formulated by the farmer and still develop the solar farm efficiently.
  5. Ensure that the developer is responsible for repairing any damages resulting from the construction of the solar farm. 
  6. Ensure that the developer will take care of the poured concrete pads in the ground.

In Conclusion

Investing in the solar industry by leasing your land is a good option to attain a passive income. But if you are having farmland you need to be more careful while preparing the land use agreement. To avoid such confusion you can visit the US Department of the Interior, Bureau of Land Management for more information.

Hope this article gave you a proper idea about leasing land to solar farms and clarified your queries.

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