Diversifying farm income through renewable energy ventures

Renewable energy is providing American farmers with an opportunity to diversify their income and operations, but experts say they need to ask the right questions before signing on the dotted line.

Robert Veldman, senior land management consultant for Pinion, a consulting firm that advises on a variety of industries within the ag sector, says the creation of various tax incentives in recent years has led to a surge in interest in renewable energy such as wind farms, solar panels, and battery energy storage. Several new companies have cropped up and are knocking on farmers’ doors. 

“I probably get three to five calls from landowners a day,” says Veldman, who for the past five years has been consulting solely on renewable energy projects. 

He helps farmers sort through the opportunities and avoid pitfalls. He says there are three big questions to ask before joining a renewable energy project:

• Can it be built?
• Is this the right developer?
• Is this the right deal?

Can It Be Built?

Much like in real estate, this question is all about location, location, location. Veldman says the first question to ask is if your farmland is near a transmission line. Any energy generated by wind turbines and solar panels needs an entry point to the grid.

He says for the economics of a project to work, you typically need to be within a mile and a half of a trans-mission line. 

Other factors include if you have enough land for the project and whether it’s suitable. Consider if it’s flat enough for solar or at the right elevation for wind.

Is This the Right Developer?

So it can be built, but who is going to build it? Veldman says it is important to make sure you are working with a developer that has a successful track record of getting projects built.

“Be weary of new kids on the block trying to gain experience at the cost of your land,” he says. After signing a lease, your land is restricted for most development, even while waiting for a project that may never be built. 

Sean Stocker, vice president of development for Apex Clean Energy, says the rising number of new, untried developers is a symptom of the industry be-ing in “hyper-growth mode.” He says working with a developer you are comfortable with is especially important considering contract terms can be as long as 50 years. 

He says Apex avoids high-pressure sales tactics and spends the early days of a project educating the landowner. It may take anywhere from three to 10 visits with a landowner to go over all the details. 

“It starts at the kitchen table or in the back of the shop,” he says. “You need to understand what you’re getting into and be comfortable with it.”  

Is This the Right Deal? 

Experts say additional income from renting land to a renewable energy project can help farmers diversify their operations and pro-vide added stability when commodity prices can be unpredictable. 

Cole Baker, a farmer from Emden, Illinois, says while he is under a contractual obligation not to reveal the specific amount he makes per wind turbine on his property, he can say it is somewhere between $10,000 and $15,000 per turbine per year. 

Jon Freeman, a fourth-generation farmer from Woodson, Illinois, has 15 acres of solar panels on his property and he says the income he makes from renting the land is more than he could make farming it. 

Veldman says it is good to shop around and make sure you are getting the best deal possible for your area based on land values, but Stocker also warns of “checkerboarding,” where landowners in the same area work with different developers. 

He says the area starts to look like a checkerboard and the development process becomes complicated. He recommends talking to your neighbors; everyone work-ing with the same company may ensure a smooth, successful project. 

“Treat this as a business proposition and act accordingly,” says Jeff Danielson, vice president of advocacy at the Clean Grid Alliance, a 501(c)(3) organization focused on promoting renewable energy in the Midwest.

Danielson says opportunities to participate in renewable energy projects are only going to increase across rural America. Multiple bills passed by Congress in recent years, including the Inflation Reduction Act, have sent a clear signal to the market to ramp up investment. 

“We’re living in a moment in time where the transition from the grid that we know today to tomorrow is completely underway,” he says. “The countries that do this transition right are likely to see growth for the next 100 years and exceed their own peer countries, very similar to the U.S. growth after World War II and the building out of the Eisenhower interstate highway system.” 

He advises reviewing the contract with a lawyer and any other adviser you would usually consult on business decisions. 

“In order for it to work, farmers have to see it as good for their business,” he says. 

Outside of cash payments, Baker and Freeman say there are other details to consider. 

Baker says it is important to make sure the energy company is obligated to restore the land after installation. Freeman says ensure there is a plan for how the company will enter and exit your property as well as maintain the land and equipment. 

Also consider lifestyle impacts such as infrastructure disrupting the view from your living room window or blinking red lights from windmills at night, although Baker says many aspects are something you can learn to live with. 

“I know some farmers are on the fence and some are all for it, but our experience with these towers has been nothing but wonderful,” Baker says.