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Solar leases more popular than carbon contracts among farmers

The relative handful of farmers who have signed carbon sequestration contracts is half the size of the group that has leased land for solar electricity production.

The relative handful of farmers who have signed carbon sequestration contracts is half the size of the group that has leased land for solar electricity production, said Purdue University on Tuesday. Solar leases, which may exceed $1,000 an acre annually, are more lucrative than the rates offered for carbon capture.

In its monthly Ag Economy Barometer, Purdue economists said 2.6% of farmers in its poll indicated they had signed a solar lease on some of their farmland. By comparison, in a separate poll conducted earlier this year, just 1% of producers reported they had signed a contract to participate in the nascent carbon market. There are 2 million farms in America. The barometer focuses on operators with more than $500,000 a year in crop and livestock production.

Purdue economist James Mintert said higher payment rates for solar leases could be the key factor when compared with likely crop income, which may be a few hundred dollars an acre after expenses, or carbon contracts, which can pay less than $20 an acre and may require farmers to alter their practices. A solar installation could preclude crop production.

Payment rates for solar may “look quite favorable to expected earnings from producing crops,” said Mintert. “So far, the dollar-per-acre figure for carbon capture contracts has been very small, even relative to the price per bushel of principal crops such as corn and soybeans. So most farmers are reluctant to commit to any changes in their production practices, or to limit their future alternatives, for the small amount per acre/year offered by most carbon contracts.”

The solar industry installed 5 gigawatts of capacity in the first three months of this year, said the Solar Energy Industries Association, a trade group, on June 15. The industry’s total generating capacity of 100 gigawatts is enough to power 18.6 million homes, the SEIA said. The industry has doubled in size since 2016, aided by an investment tax credit and lower costs for photovoltaic equipment.

Solar developers look for land that receives abundant sunlight year-round and is close to roads and connection points for the electrical grid, said Landmark Dividend, which specializes in the acquisition and management of real estate and infrastructure. “The solar lease agreement will contain items such as the monthly rent that will be paid the property owner, the length of the lease, and how much acreage the development will require. Additionally, it’s critically important to discuss what happens to the solar installation once the lease has ended, as many property owners may want to return the land back to its original condition, which can be an extremely costly endeavor if done without assistance.”

Vastly different rates, from less the $500 an acre to more than $1,000 an acre, were offered during discussions about solar leases, reported farmers in a Purdue survey. Some 32% said they were offered less than $500 an acre per year. Nearly as many — 27% — said they were offered $1,000 or more per acre annually.

Of the 400 producers contacted by Purdue by telephone in late June, 9% said they had engaged in discussions with companies about leasing some of their land for solar production. Slightly less than one-third of them, or 2.6% of all farmers polled, had signed leases.

Wind is a bigger power source, generating enough electricity for 38 million homes, said the trade group American Clean Power. The U.S. Geological Survey says there are more than 67,000 wind turbines in 44 states across the nation.

The leading states for solar electric capacity are California, Texas, North Carolina, Florida, and Arizona, said the SEIA. The top states for wind power are Texas, Iowa, California, Oklahoma, and Illinois, according to the clean energy technology company Inspire.

Produced with FERN, non-profit reporting on food, agriculture, and environmental health.
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