A comparison of farmland sales in Indiana indicates that land rises in value by 1.4 percent for each mile it is closer to a commercial-scale solar energy facility, said a graduate research assistant at Purdue University. The analysis gave weight to a rising belief that energy production was becoming a factor in land prices.
“Rising farmland values near solar farms can affect farming costs and practices, potentially influencing agricultural production,” wrote graduate research assistant Binayak Kunwar in the quarterly Purdue Agricultural Economics Report. “On one hand, it potentially increases farmland values, which benefits current landowners. On the other hand, the increased values may represent an additional challenge for prospective farmland buyers.”
In his research, Kunwar used a so-called hedonic price model to separate the impact of solar generation from other factors in farmland sales throughout the state from 2015 to 2020. “Thus, if two parcels are sold in the same year, in the same county, with the same acreage, soil productivity, distance to towns and cities, both with or without power transmission lines, and the same population density, the parcel closer to solar generation is expected to sell, on average, at a 1.4 percent premium for every mile closer to the solar generation facility.”
Solar projects are offering higher and higher lease rates this year, according to farmers polled by Purdue for its Ag Economy Barometer. Bids exceeding $1,000 an acre were common, said a minority of farmers, about one in five, who said they actively engaged in such discussions in the past six months. In April, 5 percent of farmers said they believed energy production would be a factor boosting land values over the next five years.