Does My Land Qualify for Solar Leasing?
- Craig Kaiser
- Jan 8
- 8 min read
Updated: 3 days ago
Landowners often wonder if their land qualifies for solar leasing. You may be looking to make additional income from your land on a solar energy lease, but how do you know if your parcel would even work well for a solar farm? In this resource, we go over some must-haves if you want to lease your land for a solar farm, as well as factors that make the land more attractive to solar energy developers, and therefore worth larger solar lease payments to the landowner.
If you're curious if your land could be suitable for a solar farm lease, get a free LandApp property report! LandApp's free property reports provide you with a solar lease payment estimate for your property along with additional data points about your property's unique features that could affect its suitability for a solar lease. To get a free property report, find your parcel on LandApp's map below:
Key Takeaways:
Acreage Requirements: Generally, 30 acres is ideal for utility-scale solar farms, while smaller parcels (5-10 acres) suit community solar farms. Each 1 MW of capacity typically requires about 2 acres.
Exclusion Zones: Land must be free from topographical challenges, dwellings, flood zones, and other exclusion zones to be suitable for solar panels.
Proximity to Infrastructure: Land near electrical infrastructure like substations and transmission lines is more attractive due to lower interconnection costs.
Solar Power Incentivization: Government incentives can significantly increase land value for solar leasing, often more than the amount of sunlight received.
Sunlight: While adequate sunlight is necessary, it is less critical than incentives and infrastructure proximity.
Solar Farm Land Requirements
Important factors that solar developers consider when evaluating properties for solar farms include acreage, proximity to energy infrastructure, clean energy incentives, and solar irradiance.
Acreage Required for a Solar Farm
While there is no definitive answer to “how many acres do I need for a solar farm?”, we generally consider 30 acres a great start to attract utility-scale solar developers. You can list land under 30 acres for solar farms on LandApp's marketplace, it just may be more difficult to get it leased. Community Solar farms are generally a better fit for smaller parcels (5-10 acres): you can learn about the difference between Utility and Community-Scale Solar Farms here.
Generally, every 1 MW of solar farm capacity requires around 2 acres of solar panels. However, solar farms are getting larger in capacity, therefore requiring more acreage. Keep in mind local towns and authorities usually do not permit full coverage of the entire parcel, and extra acreage is required for additional solar farm infrastructure. Since most solar leases are paid on a per acre per year basis, the larger your parcel is, the more you could make when you lease your land to a solar developer.
Exclusion Zones and Buildable Acreage
Not all of your acreage may be suitable for solar panels. Exclusion zones can be thought of as land that solar equipment cannot be placed on for one reason or another. Solar farm land requirements take into consideration the many potential exclusion zones that prohibit the construction of solar panels:
Topography
Dwellings
Flood Zones
Waterways
Wilderness
National Park
State Park
Hazardous Sites
NFS Land Units
Grassland
When a solar energy developer needs to clear obstacles from the land (such as trees), it costs them more time and money. To compensate for this, they may not be willing to pay as much to lease your land for a solar farm. Receiving an offer for a solar lease on your land is more likely if it is clear of trees and structures. Although some solar developers will timber trees to construct new projects, it isn't very common. Solar developers are also willing to pay more for land that is bordered by a road so that construction and maintenance of the solar farm is easier.
After removing these exclusion zones from your total acreage, you are left with the “buildable acreage” suitable for a commercial solar farm. LandApp provides the exact location of these exclusion zones on your parcel(s), along with a calculation of the buildable acreage.
Proximity to Electrical Infrastructure
Another solar farm land requirement that is important to consider is the proximity to electrical infrastructure. The further away your land is from the electrical grid, the higher the cost of interconnection for the developer. If your property is adjacent to a transmission line, distribution line, or substation, the developer can save interconnection costs and pass those savings onto you in the form of a higher lease rate per acre.
Generally, solar developers look for land that is located within 4 miles of a substation, but the closer, the better! Similarly, parcels located within 1 mile of a transmission line are suitable for solar projects. However, having a transmission line going through the property or adjacent to it is ideal. Solar farm lease payments will increase even more if the voltage of the line or substation is in the range required by the developer for the desired project capacity. Solar developers will also consider the injection capacity. The presence of a road doesn’t mean that the road can handle big city rush hour traffic. What if that road is a one-lane highway?
Similarly, just because there is electrical infrastructure in place near your land, doesn’t mean it can handle any size solar project. It is important to remember that even if your land is not currently located in relevant electrical infrastructure, this does not mean that you can't receive solar lease offers. Electrical infrastructure and new technologies are constantly being developed to support new solar projects.
Solar Power Incentivization
Governments are incentivizing solar development more and more, and living in an area where solar energy is highly incentivized means your land could be worth a lot more when you lease it for solar panels. Energy incentives such as Renewable Energy Certificates (RECs) and energy tax incentives like Sales and Use Tax, State Median Property Tax, State Sales Tax Exempt Status, etc. will play a role in solar value.
For instance, Arizona gets more sun than any other state. But Massachusetts solar rights are worth much more due to governmental incentivization, even though land in MA receives significantly less sunshine than land in AZ. These incentives are paid to the solar developer, not the landowner.
Amount of Sunlight
The amount of sunlight (solar irradiance) that hits your land might seem like a major driver for solar lease value but, perhaps surprisingly, it is not. While your land must receive adequate sunlight, a sunny parcel is not worth as much to a solar developer as the factors mentioned above, most notably the renewable energy incentivization in your state.
The amount of sunlight can also be thought of in terms of annual solar irradiance and the absence of sunlight-blocking obstacles, such as trees and buildings. NASA defines solar irradiance as “the output of light energy from the entire disk of the Sun, measured at the Earth.” Specific to a solar lease, it is a measure of how much solar power your land is getting.
Although solar irradiance does play a role in the value of land for a solar farm, it is not the most crucial factor. Many states that are known to receive lower levels of sunlight compared to other states have some of the highest renewable energy incentives, such as Minnesota.
Due Diligence for Solar Leases
Due diligence is of paramount importance when entering into a solar lease agreement. This legal contract grants a solar developer the right to install and maintain a solar panel system on a landowner's property, while they typically sell the generated electricity back to the local utility company. In exchange for the use of their land, the landowner receives lease payments.
To foster trust and establish a mutually beneficial relationship, both parties involved in the agreement must conduct thorough research. This becomes even more crucial given the long-term duration of solar land leases, which can span from 25 to 50 years. Taking the time to delve into the details is well worth the investment.
While it is true that most solar energy companies have good intentions, it is important to acknowledge that every industry also has its share of bad actors. Thus, it is the responsibility of landowners to conduct thorough due diligence for a solar lease offer to ensure that they are working with a reputable and trustworthy company. A real estate agent who has experience in dealing with energy companies can also be a useful resource when it comes to understanding the terms of a contract and the background of an energy company.
Which One: PPA or a Solar Lease?
A Power Purchase Agreement (PPA) and a solar land lease are common arrangements in the renewable energy industry, particularly concerning solar energy. While they share some similarities, understanding their differences is crucial.
Let's start with a solar land lease. In this arrangement, a solar energy developer pays the property owner a fixed rate (typically per acre per year) to install solar panels on their land to generate solar energy. The electricity produced by the solar panels is usually sold to the local utility company. In this scenario, the property owner is generally not involved in Power Purchase Agreements (PPAs), as those are agreements made between the renewable energy company and the utility company.
Now, let's dive into the distinction between a solar lease and a PPA when it comes to residential solar systems. In a solar lease, you, as the homeowner, pay a fixed monthly rental fee for the privilege of using the solar system installed on your property.
On the other hand, with a PPA, you pay a predetermined rate per kilowatt-hour (kWh) of solar energy that you consume from the panels. In a PPA, the developer assumes the solar system's cost and sells the solar power to you at a fixed rate. Essentially, instead of leasing or purchasing the solar system, you only pay for the amount of energy you consume. It's important to note that neither solar PPAs nor solar leases offer a path to owning the solar system. In both cases, a third-party owner is responsible for all maintenance and repairs.
Now, let's explore the relevance of PPAs to the real estate industry. With the increasing growth of green energy development across the United States, the real estate and renewable energy sectors are becoming more intertwined. Property owners often receive lease and purchase offers from renewable energy developers who wish to utilize their land for renewable energy projects, such as solar farms or wind farms.
Real estate agents play a vital role in this process, as they need to understand the fundamentals of Power Purchase Agreements (PPAs) and renewable energy concepts, enabling them to effectively guide their clients through the leasing or selling of their land to renewable energy developers. By comprehending these differences and understanding the role of PPAs in real estate, industry professionals can better navigate the evolving landscape of renewable energy and provide valuable guidance to landowners.
Benefits of Solar Leasing
The main reasons that property owners choose to lease their land for solar farms include generating revenue and contributing to environmental sustainability.
Environmental Sustainability and Agricultural Practices
Contribution to reducing greenhouse gas emissions
Conservation of natural resources
Alignment with eco-friendly agricultural practices
Support for sustainability goals without compromising productivity
Generate Income
One of the primary benefits of solar farming for farmers is the diversification of income. With traditional farming, farmers are heavily reliant on crop yields and market prices for their income, but solar lease payments are more predictable.
Landowners can generate stable and predictable income from solar lease payments, which are typically paid on a per acre per year basis from the solar developer.
Solar leases are typically paid per acre per year (but this is negotiable), and the amount of solar lease payments typically ranges from $700-2,000 per acre per year. Depending on the size of the land, this can serve as a reliable secondary source of income, reducing the typical risks of financial instability for farmers.
Does My Land Qualify for a Solar Lease?
Are you interested in leasing your land for a solar farm? LandApp's solar lease estimates within our free Property Reports provide landowners with data to help them determine if their land could be suitable for a solar farm. The factors discussed above are all used in calculating this estimate. Skip the guesswork and get your free Property Report today! If you like what you see, you can list your land for lease for free on LandApp's leading marketplace for exposure to thousands of high-intent solar investors. By entering your land into a competitive marketplace like LandApp's, you can ensure that you are getting the best offer.
