You have a variety of alternatives when it comes to picking the best solar farm lease rates per acre.
SEIA predicts that by 2022, the US solar energy industry will have an installed capacity of over 142.3 gigawatts (GW).
Understanding the various solar farm lease options and the price per acre, they offer is crucial as long as this trend persists.
You may maximize the return on your investment and derive the most value from your solar farm by choosing the appropriate lease rates per acre.
The following paragraphs explore the current lease rates per acre for solar farms in the USA. We will also discuss existing solar farm lease agreements. 👇
What Are Solar Farm Lease Rates Per Acre?
First of all, we discuss what solar farm lease rates in the USA are.
Lease rates per acre can vary depending on the region in the USA but typically range from $300-$2,500 per acre annually.
Are you considering leasing your land to a solar farm? If so, you may wonder about the lease rates.
Solar farm lease rates per acre in the United States are the starting point for anyone wishing to lease property for a solar farm in the country.
Understanding the elements affecting lease rates is crucial since leasing property for a solar farm can be complicated.
- The most common factor is the location of the land relative to the nearest grid connection,
- As well as local regulations and restrictions.
- Market conditions, such as the current demand for solar farms in the area, can also influence rates.
- The size of the solar farm and its expected return on investment will affect how much landlords are willing to charge.
In short, Solar farm land lease fees depend on farm size, location, and lease period.
Solar farm leases in rural areas with more acres may cost more than urban ones with less.
Additionally, longer-term leases may offer higher rates than shorter leases.
Considering these factors is essential when negotiating a lease rate for your property.
To find the best cost for your situation, compare solar farm rates. Your solar farm land lease rate per acre should be fair.
Start searching for land after you know what elements could affect your lease rate. The land’s lease rate per acre is listed online or in local media.
Contact the landlord to explore their needs and create a leasing agreement that works for both parties. For solar farm permits and leases, research local rules and contact landlords.
If you want to start a solar farm in Texas, read our article on how to Build a solar farm in Texas.
Read More: How Much Cash Can a 1 MW Solar Farm Produce?
How to Calculate Solar Farm Income Per Acre?
Calculating the income from a solar farm per acre involves several factors…
- Including the size of the solar farm
- The solar radiation in the location
- The efficiency of the solar panels
- The current market prices for electricity
The per-acre revenue from a solar farm can be approximated with the following formula.
Read More: Get a Solar Farm on Your Land: How to Do It
👉 To begin, find out how many kilowatts of power the solar farm can produce at full capacity (kW).
Installed Capacity of Solar Farm = Total Solar Panels x each Solar Panel Capacity (kW)
👉 Then, Calculate the total electricity generation ⚡ of the solar farm per year.
Total Yearly Energy Output per Acre can be determined using the following formula:
Yearly Energy Output = Annual Sun Irradiation x Solar Panel Efficiency x Installed Capacity of Solar Farm
👉 Next, Multiply the total electricity generation by the electricity rate in the area…
Annual Income = Yearly Energy Output x Electricity Price per kWh
👉 At last, Divide the total revenue by the size of the solar farm in acres to get the solar farm income per acre is…
Annual Income per Acre = Annual Income ÷ Total Acre
For Example, 👇
Calculate the solar farm’s kilowatt capacity (kW).
If your solar farm has 10,000 units of 350-watt solar panels, its installed capacity is 3,500 kW.
Installed Capacity of Solar Farm = 10,000 x 0.35 kW = 3,500 kW
Using historical data or online resources, estimate the average yearly solar radiation in kWh/m2.
The average annual solar radiation is 1,500 kWh/m2.
Assuming the solar panels have an efficiency of 20%, the total electricity generation would be:
Yearly Energy Output = 1,500 kWh/m² x 20% x 3,500 kW = 10,500,000 kWh/year
Given that one kilowatt-hour of power costs $0.10, the total revenue would be:
Annual Income = 10,500,000 kWh/year x $0.10/kWh = $1,050,000/year
If your solar farm is 100 acres large, then the solar farm revenue per acre would be:
Annual Income per Acre = $1,050,000/year ÷ 100 acres = $10,500/acre/year
Solar Farm Income Per Acre Per Month
Landowners can get $500–$3000 per acre monthly and approximately $15000–$36000 yearly. Large solar farms in good sites may enhance that amount.
Lease your land to a solar farm? Given the interest in renewable energy, it’s becoming more popular.
Solar farms provide landowners with long-term, predictable revenue without any land upgrades. The perfect lease arrangement might pay off for years.
Read More: How Much Does a Solar Farm Earn Per Acre?
What Factors Determining the Cost of The Lease Land For Solar Farms?
Several factors affect solar farm lease rates, as discussed below.
- Size and location of the land
- Local zoning regulations
- Availability of existing infrastructure
- Cost of solar panels and installation
- Length and terms of the lease agreement
- Maintenance requirements for the landowner
- Amount of energy that can be generated on the land
- Access to public utilities
- Tax incentives offered by local or state governments
- The creditworthiness of the lessee
We discuss some details about each factor.
👉Size and location of the land:
Lease cost depends on land size and location. Bigger, better locations may cost more to lease.
👉Local zoning regulations:
Zoning regulations might affect solar development and increase lease costs.
👉Existing infrastructure:
Building new infrastructure is expensive. Thus, existing infrastructure might affect lease costs.
👉Solar panel and installation expenses:
These costs will be added to the project cost and affect the leasing cost.
👉Length and terms of the lease agreement:
Longer lease durations may cut lease costs.
👉Maintenance requirements for the landowner:
The landowner may need to maintain access roads or other infrastructure, which might affect the lease cost.
👉The energy created on the land:
More energy means more revenue for the lessee, which might affect the lease cost.
👉Access to public utilities:
Connecting to the grid can be expensive; therefore, access to public utilities can affect lease costs.
👉Government Tax Incentives:
Local or state government tax incentives can lower the lessee’s project cost, affecting the lease cost.
👉Lessee creditworthiness:
A lessee with good credit may be able to negotiate cheaper lease fees or better conditions.
These considerations can help landowners and lessees set a fair solar farm leasing price.
What is The Solar Farm Profit Margin: Positive ROI?
A typical solar farm yields a 10–25% return on investment. Most solar farms repay their costs within five to ten years. Solar farms have at least 30 years of free electricity after this time. These are approximations from the full.
Solar farms can be beneficial based on several aspects. ROI fits this criterion.
Maximizing ROI requires understanding the solar farm lease rate
Solar farm profitability and ROI depend on location, solar irradiation, installation and maintenance costs, financing conditions, energy prices, and government subsidies. Many things affect solar farm economics.
Solar farm developers want to profit. A positive ROI means the project earns enough to cover construction, finance, operating costs, and return on investment—project revenues.
The median levelized price of power (LCOE) for utility-scale solar photovoltaic (PV) schemes in the US in 2020 was 3.4 cents per kilowatt-hour, according to NREL analysis (kWh).
Suppose a leased solar farm generates 3 cents per kilowatt-hour at 10 megawatts (MW). Project ROIs and profit margins vary (kWh).
A power purchase agreement (PPA) with an electrical consumer might earn $62 million over 25 years. This estimate estimates 25 years of plant electricity generation.
ROI = (Revenue – Expenditure)/Cost
ROI=($62 million – $50 million)/$50 million
ROI = 24%
The 25-year PPA will return 24% on the project.
Each solar farm has its own cost and income structure.
Thus, profitability depends on several factors. Several things affect solar farm profitability. Financial and feasibility studies should precede solar farm investment.
Types of Solar Farm Leases
In Solar farm lease rates per acre, Solar farm leases vary depending on the parties, project size, location, and other factors.
Operating and ground solar farm leases exist. Some solar farm agreements require monthly rent, while others do not. The following solar farm leases are popular:
- Leases with Fixed Rent
- Power Purchase Agreement (PPA) Lease
- Sale-Leaseback Lease
- Hybrid leases
- Build-Operate-Transfer (BOT) Lease
#1. Leases with Fixed Rent:
Landowners receive a set rent amount lease rates or year regardless of the solar farm’s energy production or revenue.
In leases with Variable Rent, Landowners receive a certain amount per acre or year, depending on the lease. Fixed-monthly leases are becoming more popular.
#2. Power Purchase Agreement (PPA) Lease:
A solar developer sells electricity generated by the solar farm to a third-party energy buyer under a PPA lease.
This is a Power Purchase Agreement (PPA). A power purchase agreement is this arrangement (PPA).
A power purchase agreement is a type of rental arrangement (PPA).
The landowner may receive a fixed rent or a percentage of PPA earnings instead of rent.
#3. Sale-Leaseback Lease:
The original owner may lease the solar farm via a sale-leaseback agreement after selling it to a different investor.
Then, the solar farm’s initial investor transfers the lease to the landowner. The landowner can invest or pay off debt using selling proceeds. They have both alternatives.
#4. Hybrid leases:
Hybrid leases combine fixed-rent and revenue-sharing leases.
This unique lease combines the advantages of both forms.
The landowner may receive an annual rent payment and a proportional share of the solar farm’s revenue above a benchmark.
The landowner earns more if the solar farm outperforms the benchmark. The landowner will get more if the solar farm makes more than the baseline.
#5. Build-Operate-Transfer (BOT) Lease:
The solar developer builds and operates the solar farm on the landowner’s property for 20–25 years, then transfers ownership and operation to the landowner.
A “turnkey” lease is this type. This lease is called a “build-operate-transfer” lease. A build-operate-transfer lease is its name.
These are the most common solar farm leases, but others may be available based on the party’s needs.
Before signing any contracts, it’s crucial to analyze the leasing agreement’s clauses and get advice from a knowledgeable third party. Before contracting, do this.
Tips on How to Choose a Solar Company
Finding the right solar company can be daunting, but it doesn’t have to be.
When searching for a solar company, it is important to consider the lease rates, how active they are in the community, and their experience with solar farmland leases.
FAQs
How long is a typical solar farm lease agreement?
20–30-year solar farm leases are common. Landowners and solar developers must consider lease terms. A longer lease period gives the developer more certainty to repay their investment and make a profit.
Longer lease terms can give landowners a regular income. Yet, the lease agreement’s terms and circumstances must match both parties’ long-term aims.
How can I negotiate a favorable solar farm lease agreement?
To negotiate a suitable solar farm leasing agreement, you must evaluate market conditions, estimate the project’s investment return, and consult a competent attorney or real estate professional. Only then can you negotiate successfully.
What happens at the end of a solar farm lease agreement?
As a solar farm lease expires, the landowner and developer can negotiate a new deal, renew the lease, or terminate it.
The lease will expire if they don’t. The lease agreement usually specifies the lessee’s options once the lease expires.
What are the risks of leasing land for a solar farm?
Local rules, market conditions, technology, and breakthroughs may make solar farm leasing profitable. Solar farms can modify how a property is used, and the landowner may have little input in project administration or upkeep.
How much money can a 100-acre solar farm make?
Location, solar irradiance, equipment efficiency, and the local energy market impact how much a 100-acre solar farm makes.
Depending on local electricity pricing and efficiency, a 100-acre solar farm can generate 10–30 million kWh annually, earning $1 million to $5 million. Maintenance, finance, and regulation affect revenue and profitability.
Conclusion
These are some of the most common types of solar farm lease rates per acre that you can find. Make sure you choose the one best suited to your needs for solar farms before signing any agreement.
In short, these lease rates per acre depend on location, municipal restrictions, land availability, energy generation capabilities, and lease lengths.
Rates can vary depending on market conditions and agreements. Before signing a solar farm lease agreement, it’s important to analyze the project’s financial viability.
I am interested in leasing my land
Then get ready to give your land for solar farm
I have over 43 acres in San Diego County (Boulevard Ca.) which is located along highway 8 and very close to transition/sub station infrastructure. I’ve been contacted by a solar farm company who wants to lease my land for $2,500 per acre with a 2% yearly increase for a 29-1/2 year lease, and at the end, the option to extend the lease for 5 additional years. The company flat out told me the area is very desirable for them on account of the fact it is close to needed infrastructure for tying the farm into the grid. I currently have a real estate attorney going through the lease agreement now.
My questions are, in your opinion, is the $ amount they want me to agree to a fair deal? My thoughts are the $2,500 per acre seems fair, but isn’t with most past years annual inflation around 3%?
Any advise, guidance, or opinions are welcome!
Respectfully,
Mike
It is good $2,500 per acre for you considering the inflation you must get 3% increment so you first talk to solar farm company and tell them the fact how much the inflation is.