Do People Get Paid To Have Wind Turbines In Their Land?

Wind energy is one of the fastest growing sources of renewable energy in the United States. Over the past decade, wind energy capacity has expanded significantly as more utility-scale wind farms are developed across the country. A key component in the growth of wind energy is acquiring land rights to build wind turbines and associated infrastructure.

To build a utility-scale wind farm, wind energy developers seek to sign lease agreements with local landowners, typically farmers or ranchers. These agreements allow the developer to install wind turbines and access the land as needed to operate and maintain the turbines. In exchange, landowners receive lease payments for each turbine sited on their property, providing a new revenue stream for their land.

Wind energy lease agreements represent a mutually beneficial partnership between landowners and wind developers. Landowners grant access to their property in return for income, while developers gain the land rights needed to expand wind energy production. This article provides an overview of common terms, payments, and issues to consider regarding wind energy land leases.

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Wind Energy Growth

Wind power has experienced significant growth globally and in the United States over the last several decades. According to the American Wind Energy Association (source), wind is the largest source of renewable electricity generation in the United States, providing 10.1% of the country’s electricity and continuing to grow. The amount of wind energy generated in the U.S. has increased more than tenfold since 2009.

Globally, wind power generation reached over 2,100 terawatt-hours (TWh) in 2022, up 14% from the previous year, according to the International Energy Agency (source). This was the second highest annual growth on record for wind energy worldwide. Total installed wind power capacity globally now exceeds 837 gigawatts. The IEA projects global wind capacity to reach around 1,600 gigawatts by 2030 as countries continue to invest in renewable energy to meet climate goals and ensure energy security.

The U.S. Department of Energy also forecasts strong continued growth for wind energy (source). In 2022, wind power accounted for 22% of new electricity capacity additions in the U.S., second only to solar. By 2050, the DOE expects wind to provide over a quarter of the nation’s electricity. This growth is driven by declining costs, technological advances, and supportive policies.

Land Leases

Wind energy companies typically enter into long-term land lease agreements with landowners to build wind turbines on their property. According to A Landowner’s Guide to Commercial Wind Energy Contracts from Purdue University Extension, the standard wind farm land lease is 20-40 years, with the option to extend the lease further (source). Land leases allow wind farm developers to access, construct, operate, and maintain wind turbines on the leased land.

The wind company will pay rent to the landowner for the duration of the lease. Payments are made annually, generally $5,000 to $10,000 per turbine (source). The lease will specify the exact payment amounts and terms. Most leases have built-in rent escalators, increasing payments 1-3% each year to account for inflation. Landgate reports average annual payments of $5 to $40 per acre for utility-scale wind farms (source). The number of turbines and acreage leased will determine total compensation.

Lease Payment Structures

There are a few common lease payment structures used for wind turbines installed on private land:

Fixed Rates: A set annual dollar amount per turbine that does not change over the life of the agreement. This provides predictable income for the landowner but does not account for inflation (Wind Energy Lease Agreements).

Escalating Rates: The payment rate increases at a set percentage each year, often around 2-3%. This allows income to keep pace with inflation (Wind Turbine Lease Rates – How Valuable is Your Land?).

Revenue Sharing: The landowner receives a percentage of the revenue generated by the turbines on their land. This aligns incentives but introduces uncertainty in income (Anatomy of a Wind Energy Lease).

Other options include one-time upfront payments, production-based royalties, and combinations of fixed and revenue sharing. The structure impacts both the landowner’s income and the project’s financing.

Payment Rates

The rates for wind turbine land leases can vary significantly depending on the size of the turbine, energy output, and location. According to Landgate, the average payment for a single wind turbine lease ranges from $5,000 to $8,000 per megawatt produced annually https://www.landgate.com/news/getting-paid-for-a-wind-turbine-lease-on-your-land. Landmark Dividend reports that on average, landowners receive around $8,000 per year for hosting a single turbine, though larger utility-scale turbines can bring in between $50,000 to $80,000 annually https://www.landmarkdividend.com/wind-turbine-lease-rates-2/. The key factors determining payment rates are the number of turbines, size and capacity of each turbine, and the total megawatts of energy produced.

Other Compensation

In addition to the annual lease payment, landowners often receive royalty payments based on the revenue generated by the wind turbines. According to Landgate, “The wind lease royalty is based on the revenue generated from the wind farm, and is paid to the landowner as a percentage of revenue.” ¹

These royalty payments are usually structured as a percentage of the gross revenue from electricity sales. Common royalty rates range from 1-5%, with 2-4% being typical for modern wind projects according to Windustry. ² The royalty provides a way for landowners to share in the long-term success of the wind farm.

Royalties are paid on top of the base lease payment and can significantly increase the compensation to the landowner over time. They provide an incentive for both parties to maximize productivity of the wind farm.

Length of Agreements

Wind energy leases are typically long-term agreements that give developers the right to use the land for wind energy projects for extended periods of time. According to the Bureau of Ocean Energy Management, after approval of the Construction and Operations Plan, the wind energy lease has an operations term of 25 years [1]. However, land leases with wind farm developers often range from 30-50 years in length, with some as long as 80 years [2]. These lengthy agreements allow developers to recoup their investments in building wind farms over decades of energy production.

Restrictions

Wind energy lease agreements often place restrictions on landowners and how their land can be used. According to the Landowner’s Guide to Commercial Wind Energy Contracts [1], common restrictions include:

Limits on building structures near turbines that could interfere with wind flow.
Limits on planting trees or crops that could grow tall enough to disrupt wind flow.

Limits on excavating or extracting minerals on the land that could disturb the wind project.
Requiring landowners to obtain approval before digging, planting trees, erecting structures, etc.
Restrictions on hunting or raising livestock near turbines.

These restrictions limit how landowners can use their land during the multi-decade term of the wind lease. Landowners should carefully review restrictions and negotiate for more flexibility where possible.

[1] https://www.extension.purdue.edu/extmedia/ABE/RE-5-W.pdf

Additional Considerations

There are some additional factors a landowner may want to consider before agreeing to host wind turbines, including potential tax implications and effects on property value.

Having wind turbines on one’s property can affect taxes in a few ways. The turbines themselves may be eligible for federal tax credits like the residential Small Wind Turbines Tax Credit, which offers a credit of 26% of costs incurred through 2022. Many states also levy production taxes on the energy generated – for example, Minnesota has a wind energy production tax of $1.20 per megawatt-hour produced (American Bar Association). The turbines are treated as separate facilities for taxation purposes as well (Stoel Rives LLP).

Hosting wind turbines could potentially impact surrounding property values positively or negatively. Proximity to a wind farm may deter some potential buyers. However, lease payments provided to the landowner can be invested to improve the property itself, which could make it more attractive.

Conclusion

In conclusion, there are several ways landowners can get paid for having wind turbines on their property. Most involve signing a lease agreement where they receive annual rental payments based on the number of turbines or a percentage of the revenue generated. Typical payment rates range from $4000 to $10,000 per turbine per year. Landowners may also negotiate one-time upfront payments or property tax incentives. The lease terms tend to be long, around 30-40 years, and place restrictions on the landowner’s use of the rest of their property. There are pros and cons to wind energy leases that each landowner must carefully weigh when considering whether to participate. The renewable energy and predictable income can be attractive, but the legal and land use constraints require due diligence. Every agreement is unique, so landowners should educate themselves and negotiate favorable terms. With careful evaluation, wind energy leases can be a lucrative way for landowners to earn income from their property.