Renewable Energy Project Contract Review and Negotiation
Your land for solar and battery energy storage systems is a strategic move that can significantly boost your income. This specialized contract between you, the Landowner, and the solar or battery energy storage company allows them to construct and operate a system on your land in exchange for lease payments. With the increasing demand for renewable energy, this arrangement has become popular, offering you the potential to generate substantial additional income from your farm, brownfield, commercial, or industrial land.
Solar and battery energy storage land leases involve the Landowner granting the rights for the solar or battery energy storage company to develop and operate a solar or battery energy storage facility on the land for 20 to 40 years. Thus, the landowner needs an experienced attorney well-versed in renewable energy review and can negotiate the lease on the landowner’s behalf. This will allow the landowner the benefits of leasing the land or a portion of the land for solar or battery energy storage systems, which will far outweigh the potential drawbacks, such as land use restrictions and potential changes in land value. Review by legal counsel and a well-negotiated lease is essential to achieving maximum benefits for the landowner and minimizing potential drawbacks.
Solar and battery energy storage land leasing begins with identifying suitable properties for solar or battery energy storage development. The solar or battery energy storage company conducts feasibility studies to assess the land’s potential for solar power generation or battery energy storage. A significant element of the feasibility study is the amount of usable land and proximity to distribution or transmission line capacity. If the land meets the requirements, the solar or battery company or developer will negotiate a lease agreement with the Landowner, specifying the lease duration, rental rates, and other terms and conditions.
Leasing your land for solar or battery energy storage not only provides a stable and long-term source of income but also allows you to make a significant contribution to environmental sustainability. By enabling the use of your land for clean and renewable energy, you can take pride in promoting a greener future.
Before entering a solar or battery land lease agreement, the landowner must consider various factors impacting the landowner’s decision. These include the reputation and stability of the solar or battery energy storage company, how many solar or battery energy storage projects the solar or battery energy storage company has successfully developed, whether the solar or battery energy storage company intends to own the project or sell it once the project reaches construction, the Landowner’s long-term plan for the land, and the lease rate offered by the project company.
Solar and battery land leases generally have long-term durations ranging from 20 to 40 years. The lease length depends on various factors, including the expected lifespan of the solar or battery energy storage facility and the return on investment for the solar or battery company.
Negotiations between the Landowner and the solar or battery company determine lease rates for the land for the project. Several factors can influence the lease rate, including the size and quality of the land, solar resource or battery energy storage potential, local market conditions, and the cost to develop the solar or battery energy storage project and interconnect the project to the electric grid.
One common concern among landowners is the impact of land leasing for solar or battery energy storage on land value. While it’s essential to consider the potential effects, studies have shown that solar and battery land leases generally do not negatively affect land values. Moreover, the additional income generated from leasing can contribute positively to a landowner’s overall financial position. In the case of farmland, the substantial solar or battery lease payments sometimes allow the farming to continue for future generations. In the case of brownfields, the substantial solar or battery lease payments provide income for land that is otherwise unusable due to ground contamination.
The landowner’s solar or battery leasing financial obligation should be zero. In most cases, the solar or battery energy storage company shall be responsible for all the project costs. Generally, before the solar or battery project is constructed, the Landowner cannot install permanent structures on the land, but any farming or other activities can continue. During the construction of the solar or battery project, farming or any other use of the land will have to stop. However, once the solar or battery project is operational, there is generally no impact on the landowners' daily activities, aside from the occasional maintenance visit.
It's worth noting that in the case of solar, dual use of the land is being considered, also known as agrivoltaics, so that the land can be farmed and generate electricity from the sun in the same space. In the case of battery energy storage, the footprint for these projects is very tiny (less than one acre), leaving the vast majority of the land untouched.
If both parties agree, the lease may be renewed for another term, or the solar or battery company may remove the solar or battery system and restore the land to its original condition. This restoration process typically involves a detailed plan for removing the equipment, restoring the land, and any financial responsibilities associated with these actions. Understanding these aspects is crucial for the landowner to make an informed decision about the lease agreement.
Leasing land for solar or battery energy storage systems involves many legal considerations. Michaud Law Group, experienced in solar and battery energy storage system land leasing, plays a crucial role in this process. They address critical areas of the lease, such as land rights, lease duration, rental rates, insurance requirements, and access rights. Their expertise ensures a fair and beneficial lease agreement for the landowner.
There are several other considerations for the landowner under a Lease. First, the length of the lease is, on one hand, a long-term financial gain, but it may also be a point of hesitation for landowners when choosing to lease a portion of their land for solar or battery energy storage. The lease requires the Landowner to dedicate some of the land to solar or battery energy storage for a set period, typically 20-40 years. During the operational period of the solar farm or energy battery energy storage system, the use of the land is limited and may require permission from the solar or battery company.
Second, leasing your land for solar or battery energy storage may change how it is zoned according to government agencies having jurisdiction. Before entering a lease, it’s crucial to understand how the change in land use can impact the benefits you receive from government agencies. For example, for farms in Connecticut, the land, or a portion of the land, may likely fall out of Section 490 farming status.
Third, the land or a portion of the land may be taxed differently, which can vary according to the municipality where the land is located. Landowners need to ensure the lease requires the solar or battery energy storage company to be obligated to pay any increased Personal Land and Real Estate Taxes associated with the solar farm or battery energy storage system. All increased taxes should be the sole responsibility of the solar farm or battery energy storage system company.
Fourth, the land or the portion leased for solar or a battery energy storage system may change how much of the land qualifies for participation in specific agricultural programs, such as conservation easements or subsidies, that require the land to be used for farming or ranching.
Fifth, solar and battery energy storage developers typically check the zoning regulations before entering into a lease with the Landowner. The Landowner should check the local zoning regulations to determine whether they address solar or battery development. An example would be the required easements, the space between the solar farm or battery energy storage system, and any other structure, roadway, or water, which may have different requirements based on the municipality or county.
In conclusion, for many landowners, the benefits of leasing their land or a portion of their land for solar or battery energy storage systems will far outweigh the potential drawbacks. Review by legal counsel and a well-negotiated lease is essential to achieving maximum benefits for the landowner and minimizing potential drawbacks.
Michaud Law Group invites interested landowners to partner with us and form a lasting relationship that will result in a successful and profitable lease for the landowner.
