Advancing Large-Scale Solar Boosts Farmland Prices

By Caitlin Hayes

A new Cornell study finds that the legislative support for solar projects in New York state has boosted the price of farmland, with positive and negative effects for various stakeholders. 

In the study, published Oct. 6 in Land Economics, researchers find that after New York state passed legislation supporting large-scale community solar farms in 2015, the price of farmland within two miles of energy infrastructure rose 15% to 18% compared to parcels farther away, as the market reflected the potential of those lots for solar development. The increased prices could disincentivize the use of the lots for farming.

“Landowners could see the higher prices as a positive, but there may be cascading negative effects on tenants and communities,” said co-author Wendong Zhang, associate professor in the Charles H. Dyson School of Applied Economics and Management in the Cornell SC Johnson College of Business. “It’s important to think about balancing the development to achieve the state’s energy and emissions reduction goals with potential impacts of the loss of agricultural land to solar.”

Agricultural land can be ideal for solar farms, especially when located in proximity to substations or transmission lines; and developers could offer farmers lucrative leases and steady paychecks that don’t rely on fickle weather or crops. But the loss of agricultural lands could hurt renters and farm workers, as well as reduce food security and agricultural productivity in the state, the authors write. The increased prices might also make it harder for new farmers to break into the market.

“More expensive farmland is bad news if you are trying to buy land for agricultural purposes, but good news if you are the seller,” said co-author Ariel Ortiz-Bobea, associate professor in the Dyson School in Cornell SC Johnson. ”But this additional pressure on farmland markets is very concentrated around existing electricity infrastructure.” 

“The effect is also more pronounced during the policy stage, when the economic incentives for development become clearer,” said first author Zhiyun Li, Ph.D. ’23, now an economist at the University of California, Los Angeles Anderson Forecast.

Previous research had looked at farmland values adjacent to existing solar farms. But the team wanted to capture the impact on land values of the larger regulatory and market forces that are essential for accelerating solar development. They analyzed nearly 12,000 transactions in New York state between 2007 and 2021, finding prices increased after the passage of the Shared Renewable Program in 2015 – which paved the way for residents to buy energy credits from solar farms – and subsequent policies to support the development of large-scale solar.

“We argue that an increase in land value is not necessarily about whether you have a solar farm nearby. What matters is whether you are in the corridor for transmission lines or within areas very close to electricity substations,” Zhang said. “And then the policy enables development: It sends a signal to the market participants that the location of that land has value.”

The team also found that the land values increased more in regions with higher electricity prices: The cost of farm parcels near substations increased by 20% to 22% – an indication that a higher demand for solar energy in a given region may push land prices up further.