- Introduction
- Is Solar Farm Profitable in United States?
- How Much Land Property Is Needed For a Solar Farm?
- Can I Use My Land For a Solar Farm?
- How Much Rent Do Solar Farms Pay?
- How Much Money Can You Make From a Solar Farm?
- What Is The Cost Of a Solar Farm?
- Is Solar Farms Profitable to Food Production?
- Conclusion
Introduction
Solar farms are profitable not just to landowners and solar developers alone but to all. The demand for renewable energy like solar increases demand for land among others. Moreover, solar farming will create new jobs for the immediate community became there is good return on investment of solar farms. Increase awareness of the threat of climate change has a positive effect on the growth of renewable energy. This article will carry out a rich profitability survey that will answer the question “are solar farms profitable?”.
Solar farms are also known as solar power stations or solar parks. They are large scale solar installations where solar panels, or concentrating solar systems are used to harvest the power of sun. They operate just like traditional power plants to generate electricity for consumers.
Solar farms are different from rooftop solar systems and commercial systems, because of decentralization. It usually consist of ground-mounted solar panels installed across acres of land. They don’t just provide power to local end users but in most cases provide power to the electric grid as part of the utility’s energy mix. Community solar farms and utility scale solar farms are example of the different types of large scale solar projects. A typical example of a large solar projects, are those built to power data centres sometimes onsite or off-site. Land is essential in setting up a solar farm.
Is Solar Farm Profitable in United States?
In the United States, solar energy a direct offspring of solar farms is on the rise. The last few years, saw an addition of more than 10.5 gigawatts (10,500 megawatts) of utility-scale solar installations to the grid. Total photovoltaic capacity is on the increase to nearly 40 gigawatts.
SEIA have set an ambitious goal of solar energy comprising 20% of all electricity generation by 2030 in United States. SEIA stands for Solar Energy Industries Association. To achieve this target, the industry growth will be at an average annual rate of 18% over the 2020s. While installing an average of 39 gigawatts (GW) each year.
The massive growth the solar industry has seen over the last decade will continue. It will reach new annual installation levels in 2030. This will be more than 7 times greater than the deployment by the industry in 2018. Reaching 20% of generation from solar will be phenomenal in many ways. It will result in hundreds of thousands of new jobs, Solar farms, about 14 million solar rooftops, and 500 million metric tons of CO2 emissions offset each year. 2020s is the solar+ decade according to SEIA.
This rapid expansion of solar energy is creating significant financial opportunities for developers, landowners and farmers. Since solar farming is becoming increasingly more valuable, demand for solar farms will keep rising.
Solar Industry Growth in the United States
The rapid expansion in the solar industry has come as a result of two major factors. These factors are; Investment Tax Credit (ITC) and falling photovoltaic (PV) prices. These two factors contribute to solar developers seeing a much faster return on their investments. Solar energy development has become a much more lucrative prospect.
The ITC allows you to deduct 26 percent of the cost of installing a solar energy system like solar farms from your federal taxes. Before 2020 it was 30 percent deduction. The Investment Tax Credit applies to both large scale solar projects and residential systems. Consult your CPA Tax Advisor for more in depth knowledge. Production of solar energy in some regions are as low as 4 cents per kilowatt-hour at the moment, making solar energy even cheaper than traditional fossil fuels. Solar power vis-à-vis solar farms are the world’s best route for reduction of carbon emissions.
How Much Land Property Is Needed For a Solar Farm?
Solar power plants are usually quite large projects. The amount of land a solar farm requires depends on the scale of the solar project. The land should be enough not just for the solar panels but for other solar equipment.
For solar farm installation, the general rule is that 1kW of solar panels requires approximately 100 square feet area. However, this amount of land is just for the panels only and doesn’t include the space required for other solar equipment.
For instance 5mW solar PV power plant will require an area of about 500,000 square feet. Because 1mW = 1000kW, therefore 5mW = 5000kW. Therefore 5mW = (5000 × 100) square feet or 11.478 acres.
Other Land Requirements
Soil Quality Criteria
The quality of the soil and terrain will influence the acceptability and evaluation of the land for solar farm. The terrain can affect accessibility to the area.
If it is difficult to access, build on (rocky) or covered with other obstructions, then this can become a problem for solar development and could impact the deal.
For example, if the land happens to be littered with large debris. The developer may to take into consideration the cost of removing these debris into their budget. This may affect their decision to develop the land or at least influence the evaluation of the property.
Amount of Sunlight Criteria
The land should receive adequate amount of sunlight annually for it to be viable for a solar farm. Obstructions are the major cause of not having plenty of sunlight. However you can remove these obstructions more easily, if there are on your property. But it will be very difficult to remove, if the obstructions are buildings.
Removing these obstructions can sometimes make the development of the land too costly, causing the developers to look elsewhere.
Grid Proximity Criteria
This is a major deciding factor for solar developers of solar farm. The property’s proximity to important infrastructure like roads and grid connection points are very important in the evaluation process.
These facilities are expensive and difficult to build, therefore you will stand a better chance if your land is already close to the necessary infrastructures. The property will be unfit for the development of a solar farm if these infrastructures doesn’t exit or too far from the property.
Can I Use My Land For a Solar Farm?
New solar farm projects will require acres of lands for development. This means more solar farm projects, more demand for land. But unfortunately land is not always readily available, so solar land leases are often the best viable option. However, there are factors to consider before entering into a solar lease with a solar farm developer.
Opportunities for Landowners & Farmers
This swift growth of solar energy production and the creation of solar farms across the United States are creating a number of financial opportunities for landowners, and especially large landowners, like farmers.
Depending on the crop, solar farms are more profitable than traditional farming. Because solar farm profits could end up being far greater than traditional farming practices, especially in the right climates.
Furthermore, solar farms might be preferable, because solar farm maintenance and upkeep is typically less exhaustive. It’s far less demanding compared to some traditional farming like sweet cherries, which often have to be picked by hand.
However, not all properties can be converted into utility-scale solar farms. The conversion criterion for which a property is judged is very strict.
How Much Rent Do Solar Farms Pay?
The common question on the lips of landowners regarding solar farms is, How much can I lease my land for? The answer is simple, “it depends”. It depends on the land size, soil type, amount of sunlight, accessible road and grid, market demand and government policies. These factor can influence the lease rate. But solar lease rates or rents normally range from $250 to $2,000 per acre, per year. Solar farms spanning hundreds of acres can make profits in the hundreds of thousands of dollars.
Solar Lease Process
After the value of the land is determined, then next is negotiation period. The solar developer will draft up a lease agreement for you, the landowner to review. This lease agreement should cover all these key items – the monthly/yearly rent, the acreage required, and the length of the lease. Be careful at this stage of the process and ensure that you understand all aspects of the lease.
Before Signing Your Solar Lease Consider These Things
There are a few points property owners should take into account. Consider these points before leasing your land for a solar farm.
First, while the lease negotiation is on, it’s important you figure out who will be responsible for large financial liabilities. These liabilities could be real estate taxes, landowner insurance premiums, real estate taxes and other expenses connected with the land.
Next point to consider is effect on local surroundings. Although solar farms naturally require less maintenance than other forms of power generation, they can still have a some effect on the local environment. For vehicles to access the solar farm and different components of the solar installation, service road must be build. This might necessitate the cutting down of crops of high value and other natural vegetation within the surrounding.
Lastly, it is very important to discuss what happens to the solar farm installation once the lease ends. Because you may want to return the land back to its original condition. Without assistance this undertaking of returning the land back to its original condition is extremely expensive.
How Much Money Can You Make From a Solar Farm?
The cost of maintaining a solar power plant is far less than other traditional power plants. Moreover from revenue, you can generate an approximate sum of $40,000 per year by selling the electricity from a 1mW solar farm.
How Does Solar Power Plants Generate Revenue?
Utility-scale solar farms sell their power on the wholesale electricity market by entering Purchase-Power Agreements (PPA) for their generation. This can be done using electricity marketplaces. For more on electricity marketplace check United States Environmental Protection Agency (EPA).
Relying on the national average of four peak sun hours per day, the average 1 MW solar farm would make 1,460 MWh per year. And according to Q4 2019 report, solar power trades at $27.40 per MWh. Therefore the average 1 MW solar farm can expect an annual revenue of roughly $40,000 per year.
These are average figures. The could be variations based on your area solar power generation and the wholesale market’s solar generation going rate. In addition, PPA values also has wide variations based on the wholesale electricity prices in your Regional Transmission Organization area.
What Is The Cost Of a Solar Farm?
The cost of solar farm installation is based on SEIA’s average national cost figures in Q1 2020. The cost of land is not inclusive because the assumption is that you already have a land.
According to the report, Solar farm installation costs are usually between $0.82 to $1.36 per watt. That means that a 1 megawatt (MW) solar farm would cost $(0.82 ×1,000,000) to $(1.36 ×1,000,000), that is $820,000 and $1.36 million respectively. 1 megawatt = 1,000,000 watt.
Solar farms compared to rooftop solar systems are much cheaper to build and operate. SEIA report shows that residential solar panel systems cost $2.84 per watt. And residential solar panel systems are normally below 20kW. This means the cost per watt of a solar farm is lower than the cost of residential solar power installation.
The low cost of solar farms is also the reason utilities are adopting solar farms when adding new power generation capacity. it is also very competitive with most other energy sources.
Some Interesting Facts about Solar Power Generation
Building new solar farms can be up to $10 per MWh cheaper in some cases than running existing coal plants. Most solar panels have 20-year warranties. But many of the earliest panels are still working 40 years later at 80% efficiency or more.
90% to 97% of a decommissioned solar panel’s materials can be recycled or sold.
Since 2010 the price of solar has fallen by over 70%. The efficiency of solar panels is on the increase, from 6% in 1954 to over 40% on high-efficiency panels today. And 89% of Americans support more solar farms.
All the 50 U.S. states combine have less percentage of solar jobs held by women than Puerto Rico at 45.1%. California State accounts for 38.9% of United States solar capacity and 31.7% of solar jobs alone.
There are over 242,000 solar workers in the United States, more than the coal, oil, and natural gas industries combined. Solar PV installer is one of the fastest growing job.
Is Solar Farms Profitable to Food Production?
Which Land Use Do You Prefer: Energy Production or Food?
As solar installations grow, croplands comes under pressure and these are were we grow our food. Many want more renewable energy but where will the panels hang? Based on an extensive analysis of incoming sunlight, relative humidity and air temperature, current croplands are the lands with the greatest solar PV power potential. But can we do both together in the same place?
Achieving sufficiency in renewable energy and food production are fundamental challenge in today’s changing world.
Can We Boost Food Production Farming Under Solar Panels?
Agrivoltaics also known as solar sharing is a process of farming crops under solar panels. Agrivoltaics can improve food production, water savings, and the efficiency of electricity production according to a university research. This approach will be most helpful in regions susceptible to drought and heat.
The research shows that the agrivoltaics system significantly affects three factors that affect plant growth and reproduction. These factors are air temperatures, direct sunlight, and atmospheric demand for water. This is as a result of cooler daytime temperatures and warmer nighttime temperatures in agrivoltaics system. Also the vapor pressure is lower in the agrivoltaics system, that means more moisture in the air.
The research reveals that food crops do better in the shade of solar panels because they are spared from the direct sun. The total chiltepin fruit production tripled and tomato production doubled in the agrivoltaics system. While Jalapenos had a similar amount of fruit in both the agrivoltaics system and the traditional system. In agrivoltaics, soil moisture is 15% higher than the traditional plot when irrigating every day. Therefore water usage is less in agrivoltaics system.
How Does Agrivoltaics Affect Energy Production
Agrivoltaics system increases the efficiency of energy production according to the research. It is better for solar pabels in addition to the benefits to the plants. As solar panels get warm their efficiency drops because they are inherently sensitive to temperature.
These overheating solar panels are actually cooled down by the the crops underneath as they emit water through their natural process of transpiration.
Agrivoltaics improves how we grow our food, utilize our precious water resources, and produce renewable energy. Creatively thinking about agriculture and renewable energy production together will have a great impact on our community and the world at large.
Conclusion
Solar projects are expanding massively in terms of scale and investment. Solar farms are direct response to go beyond the usual residential and commercial generation by solar power companies across U.S. With increasing demand for space and investment in the renewable energy sector there are unique opportunities for landowner’s advantage. The fact is, there is something for everyone in solar farming.