Many landowners own property that is not suitable for many uses. Desert land that lacks access to water and is far away from cities, for instance, may not have much productive worth. But that might be changing along with energy technology. Renting desert land to solar power companies allows the property owner to collect rent on a property that wouldn't earn income otherwise, and some real estate buyers specifically purchase cheap desert land so they can rent it to solar power companies.
Renewable Energy Requirement
Many states have laws that require utilities to generate a certain percentage of their power from renewable sources by a specific date. These laws mean that the demand for renewable energy will grow as the state population grows. Some states are at a disadvantage for producing renewable energy because they lack strong rivers to provide hydro power, access to the sea to collect tidal energy, or strong winds to create wind power. Solar power may be the only local renewable power source for a utility in a state where there is abundant sunshine.
A solar panel installation is a relatively low-value use for land. If a property is suitable for ranching or farming, the property owner can probably earn more money renting the land out for these uses. To be cost-effective, a solar panel installation needs a large parcel of contiguous land, according to the University of Arizona. As solar panel technology improves, new panels will be more efficient at harvesting solar energy, increasing the amount of rent that the solar power company can pay while still earning a profit.
A company that owns land can trade for emissions credits with a utility, instead of asking for cash. The company can advertise that its operations do not produce any net pollution, strengthening its brand. The emissions credits may help the land owner meet the state's emissions standards, so it doesn't have to pay fines for pollution.
One problem with renting land to solar power companies is that some areas that are good locations for solar panels, such as remote desert properties, do not have power lines, roads, and other infrastructure. The land owner may make a deal with the solar power company to construct this infrastructure instead of paying rent, because the utility may have specialized equipment and skilled workers who can install improvements such as power lines at a low cost. After the solar power company builds the improvements, the real estate is more valuable if the land owner decides to sell it.
Eric Novinson has written articles on Daily Kos, his own blog and various other websites since 2006. He holds a Bachelor of Science in business administration from Humboldt State University.