Leasing Land for Solar Farms in Oregon
Solar farming is increasing in popularity in Oregon, and it can be a great way to bring in extra income. However, it’s a big commitment to make and navigating a solar farm lease can be tricky, so we’ll break it down.
What is Solar Farming?
The premise is relatively simple: solar energy companies lease parcels of land from landowners and build racks of solar panels on that land. The solar panels harness energy from the sun, which is then converted to AC power and the solar company sells the power to the utility company that controls the local power grid. Solar farm leases usually last 20 to 30 years and can be renewed for 50 or more total years. When the lease ends, the solar company comes back to remove the solar panels and equipment, and return the land to its original state. Landowners receive compensation for allowing the solar companies to build on their land.
Government Solar Incentives for Solar Farms
Agricultural solar energy is an investment that can deliver a significant return to Oregon and Washington farmers. Especially for agricultural producers and other small, rural businesses located in these states. Wondering if you can afford a solar panel installation for your farm? With today's solar incentives for farms, you can get up to 85% of your cost recovered through cash incentives, tax breaks, and energy savings.
A selection of solar incentives in both Oregon and Washington State makes this possible:
USDA REAP Grant
Officially called the Rural Energy for America Program, or more commonly know as the REAP Grant, covers 25% of the total cost of a solar installation is available through the USDA. At Sunbridge, we in-house 100% of the grant writing at no extra cost to you so you can keep focused on your business.
Energy Trust of Oregon Solar Incentives
If you are a Portland General Electric or Pacific Power customer, your business is eligible to receive a cash rebate from the Energy Trust of Oregon. This cash rebate goes to your business and drops your cost of switching to solar.
How much you will receive can vary a bit depending on which company services your home. Current incentive levels are below.
PLEASE REMEMBER
Energy Trust cash rebates can decrease without warning. This is because each incentive level is only allocated a certain amount of funding. When “step-funding” becomes used up, the incentive rates drop to a new level. As a result, be cautious about waiting too long before reaching out to us for an official quote.
QUALIFICATIONS TO RECEIVE ETO CASH-INCENTIVE
The solar installer must be a certified Solar Trade Ally by the Energy Trust of Oregon.All solar equipment must be new and UL listed.Verification from Energy Trust tax technicians.
Federal Investment Tax Credit (ITC)
The federal government offers a tax credit of 26% of a total solar installations’ cost, including labor and equipment. There is no cap for this credit and it can be applied directly to your business’ federal taxes.
If you can’t use the entire credit in one year you can spread it out for up to twenty years. Financing is available for solar at under 5%.
MACRS for Solar
MACRS Depreciation is an economic tool for businesses to recover certain capital costs over the solar energy equipment’s lifetime. Businesses can depreciate 85% of the total system cost on the 5 years accelerated scale. This can add a tremendous amount of financial value to your business operations.
As a business owner, you are eligible to deduct this “loss in value” from your taxable income when used for your business. If you are running a profitable business, and you can show that the solar power you are generating is for business use (as opposed to personal use), then it may have a strong impact on reducing your bottom line.
How Small Can a Solar Farm Be for Leasing Oregon Land?
Most solar companies need at least five acres to make a feasible and operational solar farm, although rules and regulations differ by county.
Statewide rules currently prohibit the construction of solar power farms on farmland soil that is determined to be Class 1, Class 2, prime, or unique -- unless a solar company and landowner can establish a dual use for the land, such as beekeeping in additional to the solar farm. In that case, up to 20 acres can be designated for solar farming.
However, some counties are even more stringent and do not make allowances for dual use. Be sure to do research for your specific county and soil type.
How Much Can You Make Leasing Land for a Solar Farm?
This depends on the location and quality of the land you are leasing out, but the most optimal parcels of land can bring in up to $4,000 per acre per year. Solar companies negotiate their lease rates based on an evaluation of the land.
What Makes Good Land for Solar Farming?
Sunlight
First and foremost, the land must receive enough sunlight annually to warrant a solar farm. This means that there should be as few obstructions as possible that might block sunlight -- for instance, buildings, trees, and other objects that cast significant shadows over the land.
Available Land
Secondly, there must be enough land available to create a viable farm: at least five acres as we previously mentioned. The solar companies need enough land not only for the solar panels themselves, but also for the accompanying equipment, including wiring, inverters, and transformers.
Topography
The topography of the land is also important, since it’s much easier to install a solar farm on a relatively flat and stable parcel of land than it is on hilly or unstable land. Solar companies take into account any development necessary to prepare the land for solar farming, and if there are too many obstacles, it may not make financial sense to place a solar farm there.
Electric Grid & Road Access
The solar company will also investigate the proximity of the land to the existing power grid and access roads. It’s extremely expensive to build roads and to extend the power grid to an area where it doesn’t already exist, and both of those processes require permits, careful compliance with local laws, and intense labor. If neither of these infrastructure elements exist at your property, it will most likely not be deemed suitable for a solar farm.
Soil Classification
Finally, the classification of the soil is brought into question. As we mentioned, it’s prohibited by the state of Oregon to build solar farms on certain types of high-value farmland.
Are Solar Farms Dangerous or Noisy?
The short answer is no to both of those concerns. There is obviously some noise associated with the actual construction of the solar farm, but once it is installed and functioning, the only noticeable noise comes from the inverters, and is no louder than a typical air conditioner. Solar energy creates no greenhouse gas emissions and is a totally renewable energy source, so there is no danger to your health and, in fact, solar energy contributes to better overall health.
Things to Consider Before Signing a Solar Farm Lease
No Verbal Agreements
Be sure to get everything in writing in the lease documents. Verbal agreements or arrangements will carry no legal weight and, since these leases are often anywhere from 20 to 50 years, it’s critical to have every aspect of the agreement in writing and easily understandable to any future parties who may become involved in the lease.
Do Not Pay for Increased Real estate taxes
The lease should also clearly state that the solar company is responsible for paying for any increases in real estate taxes that may result from the installation of a solar farm. Additionally, a solar farm can cause land to lose its Current Agricultural Use Value status since it will no longer be solely used for farming, so make sure that the lease requires the solar company to pay any recoupment that may be necessary.
Have a Plan For When the Lease is Up
Lastly, the lease must include specific directives about the removal of the solar farm. The most ideal scenario is to have the solar company set up an escrow account specifically for the removal process when the lease is up, which ensures that you as the landowner will not be stuck with the expensive removal process.
Top 12 Questions From Oregon Farmers
Without a doubt, the installation of solar panels on farmland is increasing. In Oregon and Washington state, solar farms are becoming a popular secondary source of income for many farmers, ranchers, and any landowner with land not being utilized. To help you make a more informed decision whether solar is right for you, we compiled the top 12 most frequently asked questions about installing a solar farm.
1) What is a solar farm?
A solar farm is a large scale solar energy generation system. Think of it like a power plant, but without any wafting black smoke or large, unsightly cooling towers. Prices of renewable energy have plummeted in recent years. As a result, large installations like solar farms are now cost competitive with coal and natural gas generation. Utilities are seeking out the most cost effective energy generation sources, and this has created a boom in the utility scale PV market.
2) What does that have to do with me?
Great question. Thanks to the demand for more renewable energy, solar developers are seeking landowners to lease some of their land for solar farms. Developers take care of the financing, permitting, construction and operation of the solar farm. For landowners, this means a reliable source of passive income for the next 20 years and beyond.
3) How do I know if my land is a good fit?
A solar farm needs three things in order to be successful:
Access to Transmission and Distribution infrastructure
Relatively flat, open land, with good solar access.
Good old fashioned sun shine
4) How much land would I need to have available?
A small solar farm might occupy as little as 10 acres, but most solar farms in the US are closer to 100 acres.
5) What is Transmission and Distribution infrastructure?
Transmission and distribution (or T&D) refers to the way we get power from the place where it’s produced to the home or business that needs electricity. T&D infrastructure is quite expensive to deploy, so it’s important that the site for a potential solar farm be nearby existing infrastructure. Otherwise, the cost of adding new transmission lines could be too expensive to justify building a solar farm.
6) How long do these projects take to come to fruition, and how long would the lease be?
These are large projects, with long timelines to match. Each project requires a culmination of several factors including funding, site evaluation, design, permitting, and utility review, all before construction can begin. Project development can take from 2 to 5 years, in which time developers may employ a short term lease to ensure the project is able to be permitted. Once a project is ready to be built, the agreements are typically 20 to 30 years.
7) Who is going to buy the power from the solar farm?
A solar farm requires a consistent buyer of the electricity in order to be financially viable. Fortunately, many utilities are looking to diversify their generation portfolios, so solar developers are commonly able to come to a “Power Purchase Agreement” with a utility to cover the life of the project. A willing utility is an essential part of any solar development.
8) As a landowner, will I have any responsibilities in project construction?
The developers take care of everything. The only thing for the landowners to worry about is what to buy with the extra money they’re taking in.
9) Why doesn’t everyone do this?
Not every property is qualified to be the site for a solar farm. It takes a special combination of location and timing to make a project work. For properties that do qualify, however, solar farms are a great way to generate lease revenue.
10) What are some other benefits of solar?
Solar farms are silent and have no emissions. Because there are no moving parts in a solar system, minimal maintenance is required.
No water usage. Conventional power plants require a large amount of water in order to operate. The water is heated to produce steam, which spins turbines to create electricity. With solar energy, electricity is produced without any water. Therefore, communities with a higher penetration of solar power don’t need to allocate as much of their valuable water resources towards power production.
Solar creates jobs. There are now over 300,000 Americans employed in the solar industry.
Energy independence. By bolstering our own renewable energy portfolio in the US, we decrease our reliance on imported fossil fuels.
11) What steps are involved in the development process?
First, the property must go through a site evaluation. If the site seems like a good fit, the project will move into the design. The designers map out the electrical configuration of the system, and determine how the system is to be mounted. While the project is getting designed, solar developers also determine how to fund the projects. Power plants have always been attractive investments for banks and investment firms due to their predictable lifespan, and solar farms are no different. After the design is complete, the permitting phase is the next step. After the plans are reviewed and approved, then construction can begin.
12) Does solar actually make a difference?
Absolutely!! The decarbonization of our energy system is one of the most impact ways we can combat climate change. Adding new renewable energy generation assets like solar farms is a crucial step towards a more sustainable energy future.
Are You Interested in How These Incentives Work Together?
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