Due Diligence
Solar development leases are long-term, most lasting more than 30 years. It is important to take your time to fully understand what the development will involve. Does your municipality have a law regulating solar development to address siting, permitting, and installation? Do you qualify for a School District, County, Town, or Village Tax Exemption? What are implications for removing this from an existing agricultural use? It is important to take time to review the project as a whole before signing an option agreement (development phase).
Property Restoration
Ensure the agreement specifies responsibility for solar array decommissioning. This guarantees proper removal and land restoration if the lease ends, the company dissolves, the project is sold, or the array becomes nonviable. Restoring the land to a cultivable state comes with significant costs. Farmers must demand developer assurance, such as a financial guarantee, to cover removal expenses should the solar company face bankruptcy or dissolution. This precaution is essential.
Agriculture Assessments
Switching from agricultural to non-agricultural use after receiving an agricultural assessment might entail a “conversion payment.” Prior to lease or contract signing, verify if solar panel installation prompts this payment. The landowner listed is liable. Collaborate with your assessor to estimate the potential conversion payment. Landowners must inform the assessor within 90 days if they change a parcel that had been granted an agricultural assessment to a non-agricultural purpose. Failure to report this conversion could result in a fine of up to $1,000 for the landowner.
Lease Agreements
Solar energy agreements often start with an option contract between developers and landowners. This grants developers exclusive rights to assess project feasibility. If chosen, a full contract for development, construction, and operation follows. Developers assess solar capacity, conduct environmental studies, and determine construction feasibility during this period. Option durations vary, typically from one to ten years, and remain exclusive, preventing other solar development agreements.
Upon positive investigations, the developer activates the option, proceeding with the full solar project agreement. Often, this involves easements or property leases for project support.
Negotiation Elements
Negotiations for a solar development lease commonly involve terms related to lease duration, rental payments, payment timing, land use restrictions, site restoration, insurance, tax implications, access rights, decommissioning, and dispute resolution. Be sure to make sure the solar developer will be paying the taxes and that there are periodic rate increases.
Getting Paid
Certain developers may delay payment until power activation. If your land is accessible for farming during due diligence, this might not pose a problem. However, as projects shift from development to operation, land may be occupied for 6-12 months, disrupting farming. It’s advisable to negotiate payment during this transition.
The potential earnings from your land vary widely due to factors like location, acreage, proximity to a substation, and your willingness. A key clarification: will payment cover all leased acres or only those with panels? For instance, panels might occupy just 60%, affecting lease profitability if the rest serves as buffer or easements. Additionally, define maintenance expectations—usually, companies care for fenced panel zones, while land outside may be your responsibility but constrained by use restrictions.
Tax Implications
Leasing farmland for solar development can trigger tax implications. Income from leases may affect property tax assessments and potentially change the land’s agricultural classification. Consult local tax experts to understand how these changes might impact your tax liability and farm’s overall financial situation. Additionally, once permanently affixed to land or a structure, a solar energy system becomes “real property” under Real Property Tax Law (RPTL) § 102(12)(b) and (f). While it’s taxable, exemptions per RPTL § 300 may apply. The assessor evaluates the solar array’s contributory value to your property’s total value.
On the Horizon : Battery Storage Facilities
With the inevitable additions of solar energy facilities across the New York State, there is a need to store the renewable energy produced. In 2022, Governor Kathy Hochul increased New York’s energy storage goal to 6 gigawatts by 2030, providing the delivery of clean energy for 20% of New York’s peak electricity demand, supporting the 70% renewable electricity target. While battery storage facilities are commonly integrated into larger solar developments, they are now being sited as stand alone projects that are typically 5-7 acres in size and will likely be planned on property adjacent to or in close proximity to the North Country transmission line. It is important that local municipalities prepare for these anticipated projects and mitigate concerns through their land use laws.
Municipal Considerations: Local officials and policymakers should establish distinct definitions, standards, and regulations for energy storage facilities. These differ from conventional power generation setups so adaptable zoning, environmental assessment, and noise level considerations are vital for seamless integration across diverse settings and applications.
Safety should be the top priority with any policy relative to battery storage facilities. While most energy storage developers aim to collaborate with government partners and first responders for effective regulations, guidelines, and emergency plans, upholding safety and adherence to pertinent codes and standards. Specific considerations should include:
- Setbacks: While battery storage facilities do not need to be located in close proximately to the nearest right-of-way, municipalities should consider the impacts their distance from a roadway would have in the event of an emergency.
- Screening: Land use laws should ensure that these facilities are screened from adjacent properties through a combination of architectural features that are reflective of the community character of the area, earth berms, native trees and landscaping. Furthermore, the facility should be properly secured by fence.
- Water & Air Quality: While these energy storage facilities do not discharge wastewater and do not produce emissions or air-pollutants, in the events of fires, what are the repercussions?
- Emergency Services: Energy storage operators should create tailored emergency plans for each facility based on national and NYS best practices. These plans should encompass various scenarios, emphasizing collaboration with first responders. This partnership would include sharing vital information, consulting on project design, and ongoing on-site training, fostering a strong safety-focused relationship.
- Noise: Sound levels among battery energy storage systems differ due to factors like facility size, enclosure type, and technology used. Projects should be designed for minimal noise impact, incorporating strategies for various settings. Sounds arise from usual equipment, such as HVAC systems, inverters, and transformers, similar to existing grid infrastructure. Common industrial sources include fans, pumps, and power-switching devices. The equipment-related noise should remain below a 60 dBA average over one hour, measured at the external wall of an adjacent unrelated building currently in use.
- Utility Connections: Local officials should consider requiring, wherever possible, that the utility lines at the site be installed underground; however, this should not pertain to the primary service connection at the utility’s right-of-way or to newly installed interconnection equipment.