Demand Solar Development Land Soars in Phoenix

Land banking and development company Vermaland has leased more than 4,500 acres of land to solar developers in recent months. The activity illustrates a recent surge in demand for solar land in Arizona. In eventual land purchases, these leases could total $40 million.

“There are a lot of factors driving demand for solar right now. There is a huge push for utilities to be obtain energy from renewable sources and solar is a great source,” Kuldip Verma, founder and CEO of Vermaland, tells GlobeSt.com. “California has mandated that 50% of their electricity come from renewable sources by 2025 and Arizona has mandated that 15% come from renewable sources by 2025. The location of our properties serve both the California and Arizona market, so solar developers have several viable options to sell the energy they generate to. Furthermore, the prices of producing solar energy have come down significantly over the years making it a low cost alternative for energy.”

The recent land leases include 2,000 acres in Gila Bend to a solar developer; 1,600 acres in Hyde; 900 acres in Harquahala Valley; and an additional 1,000 acres that Vermaland already had under lease with solar companies.

While there is increasing demand for solar land, there is a dearth of supply. “We are seeing a shortage because land near substations and transmission lines, which is what solar developers need, have been getting purchased and leased from solar developers for years now,” says Verma. “There aren’t too many viable sites left near the transmission infrastructure so we are seeing the good sites get taken quickly. On our Hyder site, we recently leased, we had multiple offers to choose from.”

This is not a new problem. Land shortages, particularly for specialized uses, like solar. “The shortage has been an ongoing problem, however, it’s been exacerbated during the pandemic, since there has been an increase in solar developers looking for land starting from earlier this year,” says Verma.

The good news is that solar land doesn’t have a unique requirement compared to land for development projects. “Solar land can be very similar to other land used for development, the main criteria for solar land are it needs to be a large tract and near the substations and transmission lines,” says Verma.

The demand, however, hasn’t yet put pressure on pricing. In some cases, pricing has increased, but there isn’t an overarching trend. “The real estate market is high right now everywhere, which is causing land prices to increase in all areas.  Since there are often multiple parties looking at parcels of land that can cause prices to go up as well,” says Verma. “The current land prices are still significantly lower than what they were prior to the recession of 2008, therefore, there is an opportunity for investors and developers to get properties at lower values.”

Recent California laws could fuel more demand for solar land in Arizona in the coming years. “California wants to be 100% renewable by 2050, so I feel the demand for solar energy is only going to go up,” says Verma. “As time goes on, the prices for producing solar will also continue to come down, which will make it a more viable technology.”