3 Phases of a Solar Project that Impact Landowners
Have you ever thought about leasing your land for a solar energy project? Leasing land for solar can be financially rewarding, but it’s important to understand what you’re committing to before signing paperwork.
At New Era Land Services, we work hard to ensure successful renewable energy projects—both for developers and landowners. This article explores three important phases of a solar project and how they impact landowners like you.
1. Lease Option Agreement Phase
For landowners, the first step in a solar energy project typically involves signing a lease option agreement. The lease option agreement specifies a window of time—usually between five and seven years—during which a developer can execute the land lease for the renewable project. Why does this phase take up to seven years? The answer involves multiple factors, not the least of which includes gaining the proper approvals. Depending on where your property is located, the developer will enter the project into a “queue” for review by the appropriate ISO (Independent System Operator) or RTO (Regional Transmission Organization). (Learn more by reading the Federal Energy Regulatory Commission’s article about ISOs and RTOs.) Once entered into the queue, the project is scrutinized from a variety of angles, including production potential, financing, and environmental impact. Simply put, this process takes a lot of time—especially as a growing number of renewable projects enter the queue.
What to expect: After signing the lease option agreement, it’s business as usual for the landowner. If you’re a farmer, you can continue using your land to grow and harvest crops. You’ll also receive an ongoing, non-recoupable amount from the developer to hold the option to lease. However, since construction has not commenced and no energy is being produced, the payment amount will be lower than future phases. Our team at New Era Land Services would keep you in the loop as the project advances.
2. Pre-Operating Phase
Receiving a notice to proceed (NTP) marks the beginning of the pre-operating phase, which is sometimes referred to as the construction period. Pre-operation usually lasts 12 to 18 months and involves a variety of tasks. Examples include clearing ditch rows and fence line brush, preparing the ground for proper turf management, obtaining local permits, widening county roads as needed, delivering glass panels and related infrastructure to the construction site, and ensuring proper installation.
What to expect: Upon learning about the notice to proceed, our team at New Era Land Services would contact you to discuss timing and next steps. Landowners usually continue using their land until it is taken into possession by the developer. Keep in mind that solar companies often take possession during the fall, after the harvest. This helps avoid crop loss and sets the stage for a clean changeover in the new year. Payments during this phase tend to be higher than the lease option agreement period but less than the operating phase, as energy is still not being produced.
3. Operating Phase
After construction concludes, it’s time to start producing solar energy and putting it onto the grid. Landowners should keep in mind that most operating periods last 30 to 40 years. That’s a long time to tie up your land, but it’s also nice knowing that it will produce a predictable income for decades. At the end of the 30 to 40 year lease period, you (or your heirs) will likely have the option to extend. If no extension is secured, the developer must return the ground back to its previous state (or as closely as possible).
What to expect: Your land is fully operational as a solar field and generating energy. This means that you’ll receive the full lease payment amount throughout the duration of the agreement.
Explore Solar Land Lease Opportunities
Farmers and other landowners can contact New Era Land Services by submitting our contact form. We look forward to learning about your property and exploring renewable energy opportunities with you.