Leasing Your Land for Solar: A Guide for Landowners

In the three-county region, there are already several community scale solar (CSS) farms in operation, which produce and sell energy either under wholesale contracts with a utility or at retail rates to subscribers. Several more projects are in the planning stages, and the community solar market sector is expected to continue to grow.

Developing community scale solar is a complicated business endeavor. Most landowners lease their land to a solar developer who is responsible for the development of the project. Solar developers will often proactively contact a landowner if their property is a good candidate for development. Alternatively, if a landowner would like to find out if their land is suitable they can contact a solar developer to do an initial assessment of the property.

If the property is deemed to be a good site for solar, the developer will offer to lease the property for a specified amount of money and length of time. Before entering into an agreement a landowner should consider seeking legal and tax guidance. In addition, there are ways to develop a property that are lower impact and more environmentally friendly that a landowner may want to investigate.

Below is additional information and resources to provide an initial foundation for leasing private land for solar development.

Note: some of the resources listed are provided by private firms. We have vetted these resources for accuracy, but their inclusion does not represent an endorsement of  services.

Is Your Property Suitable for Solar?

A solar developer is the best person to evaluate the suitability of your property for solar. There are many variables and criteria that the developer will consider. The following criteria are of the highest priority:

Proximity to utility infrastructure: Community scale solar (CSS) requires access to the utility’s three-phase distribution lines. If this infrastructure is not within close proximity, the interconnection costs of the solar project can be prohibitively expensive and render a project economically infeasible.

Topography: Flatter parcels away from inclines that would cast shadows are the easiest for a developer to work with, but not necessarily. Depending on the orientation of slopes, size of your parcel and more, your parcel may still be a good candidate.

Existence of wetlands or floodplains: There are federal restrictions on placing solar developments in 100- and 500-year floodplains or too close to wetlands.

Amount of land available: The Solar Energy Industries Association (SEIA) estimates 6 to 7 acres are required for every megawatt of solar. Based on this estimate, a 5 MW solar development would require 30 to 35 acres of suitable land.

For more information on solar site screening and selection considerations, see:

• Upfront Solar Site Screening and Selection Considerations
• What Do Solar Developers Look For In a Property?

What Might Your Property Be Worth?

Solar developers rarely buy land for CSS; they typically contract to lease it over a period of 15-40 years.  The lease will specify a rental rate on a per-acre basis, with an annual escalation factor to account for future inflation.

The process of ascertaining an appropriate rental value for land can be complex and is influenced by a range of factors. Probably the biggest considerations are the cost of connecting to the grid (which has to do with the site’s proximity to a transmission line, distribution line or substation) and the capacity of the line to accommodate additional electricity.

Ease of construction can also affect the lease offer: a flat, accessible site with few or no obstructions will be the most attractive to a developer. The size of the developable part of the parcel can also enter into the calculations, as a bigger site potentially offers greater economies of scale which can make for a more lucrative development.

On top of all that, the local market for renewable energy can make a huge difference in what the developer can count on earning from the electricity generated by the project. State clean-energy mandates and utility procurement programs can drive up the price that new renewable energy can fetch in the market. Both of those factors are present in Garfield, Eagle and Pitkin Counties.

Given all these factors, solar lease rates in our area tend to fall in a range of $300-$1,200 per acre, with an average of around $750 per acre.

The Development Process

If a solar developer has an initial interest in leasing your property, they may approach you with a letter of Intent (LOI), sometimes referred to as a term sheet. This document outlines all of the most important contractual terms that a developer is proposing. Signing the LOI is not legally binding, but it creates an understanding between the two parties that both intend to move forward with the project. Developers have to invest significant time and resources into due diligence activities before being able to move forward with a site, and need to ensure that the landowner is committed. More details on LOIs, typical terms and the due diligence process can be found here.

You should also conduct your own due diligence to ensure that you are transacting with a reputable and experienced solar development firm. There are many considerations from a landowner’s viewpoint. To help landowners understand these considerations, the Solar Energy Industries Association has developed a helpful Guide to Land Leases for Solar, which includes a list of questions for landowners to ask a developer before entering into a lease contract.

If after due diligence both you and the developer decide to proceed, you will negotiate a legally binding lease contract, each party having their own legal counsel. Needless to say, it is essential to have an attorney representing you in negotiations and reviewing the fine print of any contract that will tie up your land over a period of decades. It may be advisable to engage a separate attorney for advice on optimizing your tax situation. The law firm Stoel Rives maintains a section on its website, The Law of Solar: A Guide to Business and Legal Issues, that discusses the many legal considerations of solar development including property agreements, title review, and land, mineral and water rights. The Minnesota nonprofit Clean Energy Resource Teams has made available a model solar land lease and easement contract (downloadable Word doc), which gives a useful preview of the many provisions that must be covered in a lease.

Coexisting with Solar Development

If you enter into a lease, it is in your interest to ensure that the development is done in a way that preserves the land for future farming or other uses and, if possible, allows for some other uses of the land even during the lease period.

Unfortunately, standard construction practices for building large scale solar projects have been focused on ease of maintenance, reduction of fire risk, and assurance that plants will not interfere with the equipment on the ground, with little or no regard for the environmental impacts. However, today there are low-impact practices that can improve soil health, retain water, nurture native species, produce food, and provide even lower-cost energy to local communities.

These practices include replanting native vegetation and plants for pollinators and using grazing animals to maintain the landscape rather than chemicals. Many projects have also explored growing food in solar farms, using the shade and water runoff from the panels to feed plants that thrive in those conditions. Maintaining vegetation under solar panels can also help absorb heat and increase panel efficiency. In addition, studies have shown when low-impact solar farms are co-located near agriculture areas that depend on pollinators, agriculture production may be improved. Studies have shown that even in areas where the native vegetation is disturbed during construction, it is possible to reclaim the area with native vegetation that does not disrupt the PV equipment.

Here are a few resources to learn more about low-impact development practices.

InSPIRE: This U.S. Department of Energy project seeks to improve the environmental compatibility and mutual benefits of solar development with agriculture and native landscapes. The website offers a plethora of information, including an overview of low-impact development options and a strategies guidebook.

Beneath Solar Panels, the Seeds of Opportunity Sprout: A short article from the National Renewable Energy Laboratory about low-impact development.

Farmer’s Guide to Going Solar: An FAQ from the Department of Energy’s Solar Energy Technologies Office.  

Guide to Farming-Friendly Solar: More tips from a Pennsylvania nonprofit.