Understanding How Solar Operating Leases Work: A Guide for Landowners

Solar leasing companies are expanding their reach to landowners in an effort to construct utility-scale solar farms in states with favorable renewable energy legislation. One of the most popular ways to participate in renewable energy is through a solar operating lease, a long-term agreement that allows property owners to lease land for a solar farm while a solar developer installs, operates, and maintains the solar panel system. Unlike a commercial solar lease where a solar company installs panels on-site and enters into a lease agreement with the business owner, an operating lease is different. This guide explains the benefits, potential drawbacks, and key considerations of leasing land for renewable energy.

What Is A Solar Operating Lease?

A solar operating lease is a financing arrangement in which a landowner leases their property to a solar developer for the installation of a solar energy system. Instead of building and maintaining the solar panel system themselves, the landowner receives regular lease payments over the term of the contract. This model allows landowners to lease land to a solar company without investing in solar panel installation or handling project logistics. 

If the landowner has a business, home, or working farm on the property, they may also be able to negotiate for the use of electricity generated from the solar system. While these agreements can be complex, a solar asset owner may allow the landowner to offset his or her own energy expenses in addition to receiving lease payments. 

How Does A Solar Operating Lease Work?

The process of entering into a solar lease agreement involves several key steps for landowners:

Site Evaluation & Land Commitment

The solar developer assesses the property to determine its suitability for solar project development. Certain factors such as sunlight exposure, land topography, and proximity to the electrical grid are important considerations during this step. The solar development might sign a letter of intent with the landowner indicating the proposed terms of a solar lease pending interconnection approval. 

Interconnection Application & Engineering

Once the land is deemed viable for a solar project, engineering is completed and an interconnection application is submitted to the local utility company. These applications include details such as the size and scope of the proposed project, necessary transmission line upgrades, technical specifications, and the parcel ID of the project. 

Lease Negotiation & Agreement Signing

After interconnection is approved, the solar developer will enter into a lease agreement with the landowner. During this phase, several aspects of the lease are negotiated including lease payments, project timeline, and maintenance responsibilities.

Solar Panel Installation & System Activation

After local permits are secured for the project, construction begins. When the system is fully erected, it is then tested, connected to the electrical grid, and activated. 

Long-Term Lease Payments

The landowner receives payments according to the terms outlined in the solar energy lease agreement.

How Long Is A Typical Solar Panel Lease?

A solar lease agreement typically lasts between 20 and 30 years depending on the financial viability of the project and the off-taker agreements with utilities, end-users, or community solar programs. The lease duration is also designed to match the lifespan of the solar panel system, allowing the solar company to maximize energy production and return on investment.

At the end of the lease, landowners generally have three options:

  • Lease Renewal: The agreement may be extended for additional years if both parties agree.
  • Land Restoration: The solar partner removes the solar energy system and restores the land to its original condition.
  • Purchase Option: Some contracts offer the landowner the option to buy the solar panel system at a reduced cost.

Benefits Of A Solar Operating Lease

A solar operating lease offers several advantages for landowners looking to lease their land for solar panels:

  • Stable & Passive Income: Lease payments typically range between $1,000 to $5,000 per acre annually, depending on location, grid access, and energy market conditions.
  • No Maintenance Required: The solar partner is typically responsible for system installation, upkeep, land maintenance, and project decommissioning.
  • Optimized Land Use: Leasing land for renewable energy allows property owners to earn income from underutilized land without disrupting other agricultural or business operations.
  • Environmental Impact: Supporting solar project development promotes renewable energy adoption and supports clean energy for the local community

Disadvantages Of A Solar Operating Lease

While a solar lease agreement has numerous advantages, there are also some potential drawbacks to consider:

  • Long-Term Commitment: Since solar land leases last 20 to 30 years, landowners must be comfortable with a long-term agreement.
  • Land Use Restrictions: Once the lease is signed, the land cannot be used for other purposes unless specified in the contract.
  • Complexity Of Agreements: Lease terms, payment structures, and tax implications can be complex, requiring careful legal and financial review.

It’s important to analyze these obstacles carefully and not be confused with common negative myths about solar energy

How to Compare Solar Lease Companies

Not all solar leasing companies offer the same terms, so it’s important to compare options before signing a solar lease agreement. Key factors to consider include:

  • Company Reputation & Track Record: Work with an experienced solar developer with a proven history of solar project development. This can help shorten project timelines and avoid pitfalls of zoning and permitting.
  • Lease Payment Terms: Ensure competitive lease rates with transparent escalation clauses for inflation. It’s important to get multiple lease quotes from different solar companies to ensure you are not leaving money on the table.
  • Interconnection Expertise: Companies with expertise in interconnection applications will ensure smoother project execution. These applications are complex and riddles with obstacles. Be sure to choose a company with a history of success.
  • Project Scale & Type: Some companies specialize in commercial solar while others are experienced in utility-scale solar farms and community solar projects. It’s vital to work with a company that has experience building large-scale projects. 

If you’re looking for a reliable solar developer, learn why Genie Solar Energy is a top choice for landowners and investors.

What To Consider Before Signing A Solar Lease Agreement

Before signing a solar lease agreement, landowners should evaluate local zoning laws to ensure that their property meets local zoning requirements for solar project development. They should also consider additional income opportunities for the land earmarked for the project. It might be more advantageous to do something different with your property. Finally, confirm the responsibilities of the solar developer in your lease agreement. You do not want to be left with a half-built project that is generating no revenue.

Why Partner With Us

Genie Solar Energy is a trusted leader in solar land leasing, offering landowners expert guidance in solar project development. With a commitment to transparency and long-term success, we ensure top dollar for our landowner partners. Are you ready to lease your land for solar? Contact our team today for a free land assessment and start earning passive income. 

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Strict Adherence To Local Law

Landowners considering leasing their land to Genie Solar Energy can have full confidence in our meticulous adherence to legal and regulatory standards at all levels. Our team not only rigorously follows local township laws, ordinances, and building codes but also ensures compliance with state and federal regulations. The extensive experience and deep expertise of our team enable us to expertly navigate the complex legal landscape that governs solar energy projects.

This capability is crucial, as non-compliance can lead to severe fines or even project shutdowns. By choosing Genie Solar Energy, landowners partner with a company that prioritizes lawful operation and risk mitigation, ensuring that every project progresses smoothly and securely from conception through completion and operation.

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Proven Track Record

Landowners looking to lease their land for solar projects should consider Genie Solar Energy, a subsidiary of the established Genie Energy conglomerate, which boasts a proven track record of success in the solar industry. With over 1.8 million solar panels installed, Genie Solar Energy is one of the nation’s leading solar development firms. Our dedicated team includes over 250 professional solar installers, ensuring high-quality and efficient project execution.

This extensive experience and scale reflect our capability to handle projects of any size, offering landowners reliability and expertise that translates into maximized energy production and optimized financial returns from their leased land. Partnering with Genie Solar Energy means choosing a leader with a proven commitment to advancing solar energy and delivering tangible benefits to our partners and the communities we serve.

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Local Solar Development Experience

Landowners considering leasing their land to Genie Solar Energy can take advantage of our unparalleled experience and expertise with local ordinances, laws, and building codes across various municipalities and townships nationwide. Our extensive footprint and history of working within diverse regulatory environments equip us with a deep understanding of local requirements. This knowledge ensures that every solar project we undertake complies seamlessly with area-specific regulations, thus minimizing delays and avoiding potential legal and regulatory hurdles.

For landowners, this means a smoother, faster project approval process and a more efficient path to generating returns from your leased land. By partnering with Genie Solar Energy, you benefit from our adept navigation through the complexities of local regulations, ensuring that your land’s transformation into a productive solar farm is both compliant and expedient.

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Extensive Energy Experience

Landowners considering leasing their land for solar projects will find a robust and comprehensive partner in Genie Solar Energy. As a subsidiary of the internationally recognized Genie Energy conglomerate, Genie Solar Energy is not just a leader in solar engineering and development; our team also brings extensive experience across the broader energy markets, including wholesale and retail electricity markets. This depth of expertise allows us to tailor solar solutions that are not only technically efficient but also economically optimized for each landowner’s specific circumstances.

By choosing Genie Solar Energy, you are partnering with a team that understands the intricacies of energy production and distribution, ensuring a profitable and seamless integration of your land into the solar energy landscape. This comprehensive approach guarantees that our solar projects deliver maximum value, making the most of our shared energy future.

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End-To-End Project Management

Working with Genie Solar Energy offers landowners a seamless and secure experience throughout the lifespan of a solar project. As part of the financially robust Genie Energy conglomerate, Genie Solar Energy manages all aspects of solar development projects from the initial planning and permitting stages through to construction, operation, and eventually decommissioning. This end-to-end involvement ensures that the same experienced team handles the project for decades, providing continuity and stability that many competitors cannot match.

Competitors often lack the resources to manage a project throughout its entire lifecycle and may sell the project to different companies at various stages, leading to potential inconsistencies in management and execution. By leasing their land to Genie Solar Energy, landowners benefit from a single, reliable partner who provides consistent oversight and maintains the highest standards throughout the duration of the project.

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Financial Prowess

Being backed by a publicly-traded company like Genie Energy, Genie Solar Energy brings significant financial stability and reliability, which is a considerable advantage for landowners considering leasing their property for a solar project. This financial strength ensures that Genie Solar Energy can see projects through from inception to operation without the risk of bankruptcy that might plague less financially secure competitors.

Moreover, whereas competitors might lack the funds to complete a project and be forced to sell it, Genie Solar Energy’s robust financial backing allows it to maintain ownership and direct control throughout the project’s lifecycle. For landowners, this means greater security in the lease agreement, timely and reliable lease payments, and the assurance that the project will be managed by a seasoned team with a solid track record in the energy market.