If you have been contacted about allowing a solar array on your land, you may be wondering how long you would be leasing out your land for. That should be clear in any proposed lease, but it can be hard to calculate because there are different periods for different parts of the lease.
Typically, solar leases are divided into a “development term” and an “operations term.” In some cases, there is also a “construction term.”
These terms add up to 40 years or more
The development term takes place first and includes things like feasibility studies and due diligence activities, along with construction of the array if a separate construction term was not specified. If a separate construction term is specified, that will take place once the development activities have been completed satisfactorily. In either case, the lease will not go into the operations term unless all the requirements of the previous term or terms have been met.
The operations term is the period during which the solar energy will actually be generated and sold. This is the profitable time for the lease; the previous terms were necessary but costly.
It is the cost of the development and construction that make it important to have a reasonably long lease. The operator will be putting in a great deal of up-front money and it only makes sense for them to demand a period of years for the operations term.
In Texas, solar leases generally have operations terms in the range of 30 to 35 years. The development and/or construction terms generally take five to seven years to complete.
Overall, you are looking at 40 years or longer for the project in total. You should consider the profitability of other uses for the land, along with your own convenience, before agreeing to a solar lease.
Protect your rights when considering a solar lease
There are a variety of issues that can arise when negotiating a solar lease or other energy contract. The term of the lease is important, but it is not the only issue to consider. Always have your own attorney examine a proposed solar lease to ensure you fully understand the lease and your responsibilities. Be sure to hire a lawyer with real experience reviewing, negotiating and drafting energy leases.