Utility & Energy

Landowner Ground Leases for Solar Power Projects

By January 29, 2018 December 2nd, 2019 No Comments

As large, proposed land-based solar power projects have become more prevalent in Illinois, many solar power developers have approached landowners interested in entering into long-term ground leases. A ground lease has many important provisions that a landowner should carefully consider.

The financial attractiveness of solar ground leases is clear. Based on the typical structure of a flat rental amount per month, or year, usually with a built-in escalation factor, an acre of farmland will bring significantly more than continued use for growing crops. The landowner also will no longer have the cost and time associated with maintenance of the leased land. The solar company will typically visit the solar site a few times a year to control vegetation and conduct routine maintenance. Compared to wind turbines, a solar array, consisting mainly of panels extending to a height of 8-10 feet, is much less obtrusive, visually and from a noise standpoint.

The length of the lease is determined, in part, by the length of the purchased power agreement with the purchaser of the electric power generated, and by the terms of the project lender.

Along with solar panels, a few other items of equipment and facilities are required. A concrete equipment pad within the leased area, which will contain electrical equipment such as transformers, switches, and inverters, will be located within the leased premises. Poles and an overhead electric line may be required to connect the solar array to the nearest utility interconnection point, providing a path to the larger electrical grid. Additional easement rights will be required for the overhead line, and possibly other equipment, to cross land not part of the leased premises. A gravel road from the nearest public right-of-way to the solar facility also may be required. Typically, the project site will be surrounded by a chain link fence, often with an access path or road surrounding the perimeter inside the fence line

The time between signing a lease and the construction of the solar facility can vary, usually from 1 – 4 years. Solar developers will need permitting from the local county authorities, among others The developer will undertake geotechnical investigations, surveys, environmental reviews, utility interconnect studies and an agreement, surface use agreements, as well as other activities required before a site can be developed.

The solar company should have a plan to remove (decommission) the solar facility when the lease terminates. Because solar equipment is designed to operate for many decades, the residual value of the modules combined with the salvage value of some of the metal and electrical wiring components, means that the overall value of the equipment will likely at least partially offset the cost required for a contractor to remove the equipment. A bond or other form of financial security to insure equipment removal and land restoration may be required by the county, or can be negotiated as part of the ground lease with the landowner.

Other important considerations that the lease should cover include liability, insurance, property taxes, events of and consequences for default, legal fees, rights to assign, sell and transfer, and other factors.

Finding a lawyer with wind or solar energy ground leasing experience will help insure the landowner of fair and reasonable terms for what is likely to be a several decades long contractual relationship and help both parties to efficiently and effectively undertake negotiations to achieve a mutually workable and fair, and legally clear, agreement for the solar energy project.

Shay Law, Ltd. has been retained by many landowners around the State who a solar power developer has approached about a land lease. Our experience in negotiating leases and easements on the behalf of landowners for wind energy projects, gas and oil pipelines, and electric transmission lines provides us valuable experience in providing quality legal representation to landowners who may wish to negotiate land lease terms, both financial and non-financial, with solar developers.