Solar Farm Lease Rates Are on the Rise, But Why?

The solar energy business in Australia is booming: from massive solar farms to rooftop systems, the total number of photovoltaic panels installed across the country has nearly quadrupled since 2011. This expansion has increased Australia’s solar energy production to over 5,920 megawatts (MW), and the industry is just getting started.

To put this into perspective, 5 MW of energy will power approximately 1,500 homes for a year, and save 2,150 tonnes of CO2.

Already slated for 2017 are another 22 solar PV projects, which will add an additional 1,922 MW of usable energy to the grid. These increases in solar production come as a result of feed-in tariffs and mandatory renewable energy targets designed by the Australian government to help incentivize the development of new solar projects.

As a result, developers are looking for new areas to develop utility-scale solar farms, but there’s a problem: many locations that would be perfect for a solar farm are already owned by someone else. This dynamic has forced developers to enter into solar lease agreements with property owners, leases potentially worth hundreds of thousands of dollars by the end of their lifespan.

Determining the value of a solar power lease is a complicated subject matter, but to make it easy to understand this post will cover the development of solar farms, how solar leases are valued, and how LDC Infrastructure can help you get the most out of your solar lease.
Solar Farm Lease Rates

Why Solar Farms?

Of all the different forms of renewable energy systems, solar makes the most sense in Australia. The country’s combination of climate and latitude means that much of its surface receives more than 4 kWh of energy per square meter a day from the Sun.

This amount of solar irradiance, or “insolation”, is more than what Europe, Russian, and most of North America receive on average. The only other locations on the planet that receive similar amounts of insolation are places like the deserts of northern and southern Africa and areas adjacent to Mexico.

This amount of sunlight positions Australia firmly among the world’s top ten solar countries, and as new projects are completed, it is likely that we’ll see Australia climb into the top 5 fairly soon.

But it’s not just Australia’s position on the globe that has given rise to the fast expansion of solar projects: the technology driving solar energy production is also advancing at an astronomical rate. Over the course of a few short years, solar panels have become cheaper and vastly more efficient at generating energy. And with the advent of new battery storage facilities, or “battery farms”, solar farms can now produce energy at scale without having to worry about curtailing production levels.

Solar land Lease Rates

How are Solar Farm Leases Determined?

Determining the value of a solar land lease rate is a multi-step process that takes into account a variety of factors, such as the quality of the land and proximity to major population centers.

After all that is taken into account, the final stage of the process involves the lease negotiations, where payments, acreage, and many other items are discussed and negotiated to determine the final lease rate.

During this process, it’s important to remember that lease rates for solar farms are not standardized across the board, and that the actual rates can vary dramatically from location to location, depending on your property’s unique characteristics.

Evaluating the Property

Following the initial inquiry conducted by either the property owner or the solar developer, the land in question will be evaluated by a surveyor for its suitability for a solar project.

During this step, the property will be examined for available space, grading, objects that may create shading, soil conditions, and proximity to power lines. This stage of the evaluation will help the developer determine how much time and money will be required to develop the land, and whether or not it is worth it to enter into a solar lease agreement with the owner of the property.

The Solar Lease Agreement

If the land in question meets the developer’s criteria for a suitable location, a lease agreement will be created and sent to the property owner.

This proposal will typically contain items such as the length of the lease, how much acreage the developer will require, and a breakdown of the rental fees.

How Much will my Solar Lease Pay?

Solar lease rates are almost always based on both the quality and the quantity of the land assigned to the lease.

On average, solar rental fees will fall somewhere around $700 to $3,000 an acre. Like we’ve mentioned before, rental fees are determined by how profitable the location will be once the solar project has been completed.

It is also important to remember, that even though your land may be perfectly suited for the development of a major solar project, it might be the case that your neighbor’s land is equally valuable as well. This gives solar developers leverage, allowing them to undercut your attempts to negotiate a better deal.

However, if your property happens to meet all of the developer’s criteria, and there are no other suitable locations in the area, you can expect to receive top dollar for your solar land lease.

Solar Power Lease

Things to Consider Before Entering into a Solar Lease

When leasing land to solar companies, there are a few items that need to be taken into consideration.

First, even though solar farms are relatively low maintenance and don’t necessarily produce any sort of waste on their own, they do have an effect on the surrounding areas. The operators of the solar farm will need vehicle access to different utilities and other services, which might necessitate the creation of new roads and paths that cut through property not covered by the lease.

Second, it’s important that the lease proposal clearly outlines which party will be required to pay items such as real estate taxes, landowner insurance premiums, and other landowner expenses associated with the property.

Additionally, other details such as what happens to the land after the lease term has ended should be discussed as well, since returning a piece of property to its original state can be an extremely costly endeavor.

LDC Infrastructure’s Role

While solar leases can offer property owners with plenty of extra income, it is also the case that this income will be distributed over the course of 20 years or longer.

What if you need the whole value of your lease now? Financial situations change: sometimes there’s an investment opportunity that is too good to pass up, or perhaps you’ve decided that you want to retire early?

In these instances, LDC Infrastructure can provide property owners with a large, lump-sum cash payout for their solar lease. As one of Australia’s leading lease and rental rights acquisition companies, LDC Infrastructure offers land owners fair values, high payouts, and financial security.

Contact Us Today

To find out more information about our services and whether or not your solar lease qualifies for a buyout, please give us a call at 1300 149 449 or visit our Contact Page today.