First off, I want you to know who I am. My name is Mark Olinyk. I am a past farmer. I live on a farm. I am an owner of Harvest Energy Solutions. And Harvest is leasing a few pieces of land with intentions of installing solar arrays on them. Ironically, I too have been approached by an out of state developer to put solar on land that I own. This will be my first of many blogs referencing the topic of solar farm leases. In these blogs I will give you my honest opinion as a past farmer/land owner and solar developer with special focus on the agriculture industry.
What’s it all about? – Over the last couple of years if you are a farmer or land owner in the Midwest you may have been contacted by one or more ‘solar development’ companies telling you that you have a unique opportunity to receive silly money in rent for your farm or a piece of your farm to be used for a large solar installation.
- Is this for real? Yes, it is real. For SOME. Development companies from all over the country have signed up literally tens of thousands of acres of land from hopeful land owners. Of all the lease options signed a small percentage will most likely be developed. There are three major hurdles (and countless smaller hurdles) that need to be overcome before you will see acres of solar panels on your farm and those checks in the mail. (See the major hurdles below)
- How can they pay so much per acre? The return on the solar investment by the developers and investors make it possible to pay from $500 to $1200 per acre, sometimes even more. These are typically multimillion-dollar investments. The land lease is a small portion of that investment. But don’t get greedy here. I will explain why in my next blog.
- Why my farm? Your farm wasn’t necessarily chosen out of all your neighbors. Most times these development companies blanket the county and the state signing up almost anyone that will agree to their terms. After all, it costs them only $250 to have the option on your farm and to get started.
The Major Hurdles –
Hurdle #1: The lease with you - DO YOUR HOMEWORK! Most of the leases floating around are quite one sided and should be reviewed by your attorney. I can tell you from personal experience most attorneys hate these agreements. And most of the developers are difficult to negotiate with. Here’s an example: a lease may be suggesting that the developer wants to lease your entire farm. Let’s say its 200 acres. So, you assume that you will receive the $800 per acre (assuming that is the agreed upon lease rate) times the 200 acres. Maybe. Most likely not. Because if you read the next statement in the lease it will say “or any portion thereof”. Yup. Use your imagination here. I’m not saying that they won’t rent your entire farm but most likely they won’t. And they reserve the right to put the solar array where THEY want. There are a ton of similar restrictive provisions in these leases.
Hurdle #2: Your township or county – Will your township or county even allow this type of installation? Does your township have a solar ordinance? Does your township even want to consider a solar installation such as this? Will it simply take a special use permit to go forward? These larger solar arrays are a new concept to most rural areas. Most county and township board members are like us. They want what is beneficial for the community. So they may want to learn more about solar before they are totally on board. Patience.
Hurdle #3: Your local utility - Your utility must have a plan to buy the electricity that is produced from this large solar array. They are the most logical buyer for the energy. Remember, once produced the electricity must be sold using the existing electrical grid. If there is no program through the utility to purchase the energy, there is most likely no large solar install on your farm.
The lease with the developer cannot go forward without overcoming ALL three of the above hurdles.
Look for more of my input on these leases in the future. With immediate questions call us at 517.315.4310 or email email@example.com.
Harvest Energy Solutions