Currently in North Carolina most utility-scale solar projects have a 15-year Power Purchase Agreement (PPA) with the local electric utility. Some developers prefer to purchase the land, while others prefer to lease, depending on the project’s business model and financing arrangements. Typical land leases have a term of 15 to 30 years, often with several optional 5-year extensions. While specific lease rates are generally undisclosed, in our understanding lease rates often range between $500 and $1,000 per acre per year. Most solar PV panel manufacturers include a 25-year power warranty on their panels, which cover the panels to produce at least 80% of their original power output at the expiration of the warranty period.
Modern solar facilities may be considered a temporary, albeit long-term, use of the land, in the sense that the systems can be readily removed from the site at the end of their productive life. At this point, the site can be returned to agricultural use, albeit with a potential for some short-term reduction in productivity due to loss of topsoil, compaction, change in pH, and change in available nutrients. Leasing farmland for solar PV use, particularly land that is not actively being farmed today, is a viable way to preserve land for potential future agricultural use. PV use is particularly valuable in this regard when compared to commercial or residential development, which require changes to the land that are very difficult to reverse. For landowners struggling to retain ownership of their land due to financial strains, solar leasing may provide a vital, stable income solution. It may also serve as a more appealing alternative to selling their land to buyers intending to use the land for other, more permanent non-agricultural uses.
While it is very difficult to predict the state of electricity, agriculture, and real estate markets 25 or more years into the future, existing circumstances can provide some insight into the likelihood of today’s solar facilities continuing as solar facilities at the end of the initial PV modules’ useful lifetime. The he economics of existing solar facilities are such that many of the projects built today are likely to update some of their equipment after 20 or more years and continue to operate as a solar electricity facility for many more years. The ability to facilitate interconnection to the electric grid provides great value to a landowner. A parcel of land featuring this capability in today’s market will likely also appeal to solar developers in the future due to the infrastructure cost savings.
- ^ Ted Feitshans, Molly Brewer.Landowner Solar Leasing: Contract Terms Explained.NC State Extension Publications. May 2016. Accessed March 2017. https://content.ces.ncsu.edu/landowner-solar-leasing-contract-terms-explained