Land Leasing for Solar Development

Pennsylvania now stands at the beginning of the development of solar energy availability. Utility-scale providers are in the process of getting necessary permits, identifying likely sites, and negotiating with landowners all over the state. How much development will occur is unknown, but many landowners will need to make decisions long before we know what development levels are going to be.

Current situation

Presently at the beginning of April 2021, there are over 370 utility-scale solar projects from Pennsylvania in the process of applying for a permit through PJM, the permitting body which manages the electric grid in Pennsylvania, New Jersey, Maryland. This permit, if approved, will allow them to sell electricity to the grid.

We estimate that over 5,000 Pennsylvania landowners have been contacted for a lease or sell option for utility-scale solar projects. We estimate that over twice this number of landowners will be contacted over the next two years for the same purposes.

While there is a lot of leasing and permitting activity occurring, this has not yet led to a lot of utility-scale solar energy in Pennsylvania. There are only 8 projects in PA currently producing electricity (as of 4/19/2021). We expect many more projects to come to fruition, but we don’t believe the majority of proposed projects will be developed.

Siting Considerations

While all areas of Pennsylvania have adequate sunlight to make a project feasible, developers need access to the electric grid; this means that most -- if not all -- projects will be located close to high-voltage power lines. Other considerations might include south-facing exposure, environmental factors (wetlands, runoff potential), close access to substations, and ease of construction on the site. Farms that are not located near high-voltage transmission lines will likely not be considered for a solar lease at this time.

Economics

Solar panels have had a dramatic drop in price over the last several years. In addition, there is an emphasis on alternative energy from private and public entities. The upfront costs of solar development are high, like most energy development projects. The DEP estimates this cost at $1.13 million per MegaWatt (MW). It takes approximately 7 acres of panels to produce a megawatt of electricity.

Farm Operations

A lease may or may not allow the landowner to use the land for agricultural purposes once a lease has been consummated (the lessee has exercised their option to develop). This is something that should be worked out in a lease document if the farm wishes to conduct operations inside of the leasehold area. Ag operators should explore the feasibility of farming operations around solar panels and should see if there are opportunities to be paid by the solar developer for maintaining vegetation through grazing or harvesting if they are interested.

Lease Agreements

Lease and purchase options for solar tend to be relatively long periods (2 to 5 years) while the lease itself tends to last for decades (25-50 years). This is a long-term decision that should take careful planning and consideration. These documents are typically long, complicated, and the impacts could be multigenerational – legal counsel is a must!

Learning Opportunities

Landowners should seek information from trusted, unbiased sources. Several land grant universities offer webinars and publications. Penn State Extension is offering a free leasing webinar on May 19, 2021 for those seeking more information. Recordings of prior webinars are also available by typing “solar leasing” into the search bar on the Penn State Extension Website.