Explaining the leasing process for solar farms

(Posted Jan. 30, 2020)

By Ris Twigg, Staff Writer

Over the last few months, solar energy companies have approached several landowners in Madison County, asking to lease their land.

Pen and paper in hand, some of these companies are asking landowners to sign leasing agreements moments after explaining the solar farm projects.

Currently, Madison County has two solar farms in the pre-application process with the State of Ohio. One may span more than 1,500 acres.

In an effort to help landowners better understand the solar leasing process for their farms, Ohio State University Extension specialists hosted a discussion titled “Solar Leasing 101” at the Madison County Engineer’s Office on Jan. 22.

“When we think about the energy mix of a region—so, where we get our energy from—a region’s energy mix is dependent on the resource availability, technology, economics and what (researchers) refer to as the 3 P’s—policy, politics and public opinion,” said Eric Romich, an energy specialist for Ohio State University Extension.

Romich said two big reasons why landowners are being approached is because solar construction costs have decreased and a solar energy policy is changing.

This year, for the first time in more than a decade, the solar energy investment tax credit fell from 30 percent to 26 percent. In a few years, the tax credit will be locked in at 10 percent indefinitely, Romich said, so investors are rushing to get projects started before the tax credit reaches that point.

Regardless of the tax credit, solar power is rapidly expanding throughout the Midwest, Romich explained.

“If we compare to 2015, California to the Midwest, there’s this huge gap where there’s all these (solar) interconnection cues in California, but not in the Midwest,” Romich said. “If you fast forward to 2017, there’s a real rapid closing of that gap.”

With all of this growth in solar energy, what should landowners know about the process?

First, a developer will submit a proposal to the Ohio Development Service Agency. If the proposal meets the agency’s requirements and exceeds 20 megawatts, it’s forwarded to the county commissioners impacted by the project, who can then vote to approve or deny it.

“That’s a critical piece of leverage that communities need to understand is that your commissioners have a say in how these projects are dealt with,” Romich said. “Just because a project is put into queue, absolutely does not guarantee it will be built.”

Counties have the ability to designate the entire county as an “energy zone,” which would theoretically approve all future projects that come forward, or they can process proposals on a project-by-project basis.

But, counties also have an incentive to move solar projects forward.

Romich shared an example of a project in Van Wert, Ohio, where renewable energy projects pay nearly $2.7 million in local taxes annually. Commissioners in the area told Romich those projects were “the largest taxpayer” and are equal to their top 10 manufacturers combined.

“(Solar) is not a job generator, but an income generator,” he said.

Another source of solar regulation to which landowners can turn is the Ohio Power Siting Board, which has jurisdiction over electric generation facilities of 50 megawatts or greater.

On the siting board’s website, landowners can track the progress of a solar project throughout the entire process and submit comments or concerns by searching for the project’s case number.

There are three primary legal documents landowners will see during the leasing process: a letter of intent to lease the land, an option to lease, and a solar lease, according to Peggy Kirk Hall, director of Ohio State’s Agricultural & Resource Law program.

The letter of intent is a gesture from a developer informing a landowner that they are interested in leasing the land and can sometimes be a binding document.

The option to lease the land, on the other hand, is a binding agreement between a landowner that grants rights to a developer to survey the property and obtain financing.

“A lot of the time, you’ll see these two documents together,” Hall said.

The solar lease itself is the primary written agreement between the property owner and the solar farm developer. Within the document are payment terms, duration of the lease, the rights of both parties—which sometimes exclude the landowner’s right to file nuisance complaint —and much more.

During the discussion on Jan. 22, landowners raised concerns about impacts to drainage tile that could be damaged as solar panels are installed. Hall said this is something landowners need to bring up while negotiating their leases.

When it comes to leasing out land, Hall recommends landowners seek legal counsel to review any lease contracts before signing.

“Speaking of attorneys, I think it takes a whole team of people to make sure that this goes well and that you do have a good leasing situation,” Hall explained. “That would be an attorney, your accountant to think about income, financial planners and farm management specialists, who can certainly be important when it comes to some of those drainage and property management issues.”

For more information on solar farm leasing, landowners can visit farmoffice.osu.edu.

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