Across the United States, solar land leases are increasingly popular mechanisms for the development of solar farm projects—with Chippewa County, Minnesota emerging as a prime location for landowners to lease their land.
What is a Solar Land Lease?
A solar land lease is a long-term agreement between a developer and a landowner, typically in the region of twenty-five years, wherein annual payments are made by the developer to the landowner for the use of their land. Because solar energy generation is consistent and predictable over time, these annual payments are usually made on a per-acre basis. In some instances, however, payments are made on a per-megawatt basis, but this is less common. The per-acre payment structure is more widespread as it allows for a reliable revenue projection across the entire lease period. Additionally, annual rent escalation is usually included as part of the lease agreement, with rates typically landing somewhere between 1.5% and 2.5%.
Chippewa County Solar Farms & Solar Land Leases
Back in 2018, Brainerd Dispatch reported that two solar garden projects (Crater Community Solar Garden and Centaurus Community Solar Garden) had recently been completed, while a third (Taurus Community Solar Garden) was under construction. Berkshire Hathaway Energy, alongside Geronimo Energy, had been developing these solar gardens as part of Xcel Energy's Solar Rewards Community Program. This increase in solar development came about as a result of 2013 legislation requiring Xcel Energy to provide community solar gardens in its service territory. Of course, with this requirement in place, suitable land to house these projects is in demand, leaving Minnesota landowners uniquely well-positioned to take advantage of increased solar development in the state. This is particularly true of Chippewa County, where a number of other renewable energy projects have popped up recently.
Chippewa County Renewable Energy Projects
It’s not just solar farms that are providing clean energy for Chippewa County, the area has seen an impressive level of renewable energy deployment across the board in recent years. In addition to the solar farms mentioned above, the County is home to Granite Falls Energy, a 65-million gallon a year ethanol plant, as well as Palmer Creek Wind Farm, an 18-turbine wind farm capable of producing 44.6 megawatts of electricity.
Xcel Energy Service Area: Solar Farms & Solar Land Leasing
Xcel Energy is a utility company based in Minneapolis, MN, serving customers in Minnesota, Michigan, Wisconsin, North Dakota, South Dakota, Colorado, Texas, and New Mexico. In terms of solar energy, Xcel aims to have 10% of its electricity generated via solar by 2030. This goal, along with the 2013 community solar legislation noted above, will require further development of PV projects such as solar farms in Xcel’s service territory. Currently, large-scale solar projects in areas such as Paynesville (100-acre site) and Atwater (37-acre site) are producing solar energy and pushing Xcel closer to its 2030 target.
The locations selected for the three Chippewa County community solar gardens were chosen to be within Xcel’s service territory and in close proximity to existing electrical distribution infrastructure. The latter is a typical requirement of developers like YSG, who recommend that solar farm projects be sited within 1,000 feet of three-phase power and 2 miles of a substation. This allows for a cost-effective interconnection process which is vital to the success of such a project.
Leasing Your Land for Solar in Chippewa County, Minnesota
If you are located in Xcel Energy’s service area then a solar project on your land in Chippewa County, MN could be suitable for interconnection to the grid. Additionally, if you have suitable land for a solar farm in any of the other states served by Xcel Energy, you could stand to profit from a solar land lease. To learn more about whether or not your land is suitable for a solar farm, reach out to YSG solar today by sending an email or calling at 212.389.9215.
How Much Money Can a Chippewa County Solar Farm Make?
The value of the land in question will determine the rate of the lease agreement and, in turn, how much money the landowner can make from such an agreement. Common factors influencing the solar land lease rate include:
- Project Size: The scale of the project in question plays a significant role in determining the value of the solar land lease. Typically, a site below 30 acres or so—but still above the 10 acre minimum—will command a higher price per acre than a larger site. This is due to factors such as electrical infrastructure and landowner risk & reward. A parcel of land in that sweet spot between 10 and 30 acres, with access to a substation and three-phase power, is ideal for developers and should fetch a higher lease rate for the landowner.
- Land Value: If a landowner is already making a profit from their land through its current use, or could profit from an alternative use, then the value of the land will force developers to increase their offer accordingly. Demand for land varies across the country depending on location and other factors, so land which is already highly valued before solar even comes into the picture will ultimately fetch a higher price for the landowner.
- Location: As mentioned above, the location of a parcel of land plays a big role in determining its overall value and, as a result, the price per acre agreed in the solar land lease. If the developer in question is seeking land in an area where suitable land is difficult to find, then this will naturally drive up the rate a landowner can expect to receive. On the other hand, if the developer is seeking land in an area where good land is abundant, then a lower price will be offered to the landowner.
- Grid Access: Proximity to the grid is vital for a solar farm project. The more accessible the grid is, the easier and cheaper the interconnection process for the developer. A parcel which is within 1,000 feet of three-phase power, and 2 miles of a substation, is likely to command a higher per-acre rate for the landowner.
Questions for Minnesota Landowners
Our checklist below will help you to determine whether or not you are able to lease your land for solar in Minnesota.
- Do you own property in the state of Minnesota?
- Is your property located in Xcel Energy's utility service territory?
- Is there three-phase power within 1,000 feet of your property line?
- Do you have a property that is at least 15 acres of flat cleared land?
- Are you within 2 miles of an electrical substation owned by Xcel Energy?
If your answer is yes to the questions above—your land is suitable for a solar farm. Reach out to YSG Solar today to discuss your options. YSG will determine whether or not a project is viable and how much your solar farm could make. To speak to a solar professional, get in touch by sending an email or calling at 212.389.9215.
YSG Solar is a project development company responsible for commoditizing energy infrastructure projects. We work with long-term owners and operators to provide clean energy assets with stable, predictable cash flows. YSG's market focus is distributed generation and utility-scale projects located within North America.
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Featured Photo by Jadon Kelly on Unsplash.
