During the last decade, the amount of electricity generated by solar power has increased dramatically, making it one of the fastest-growing renewable energy sources in the United States. This technology is the foundation for a clean energy economy that operates 24 hours a day, seven days a week.
Along with utility-scale solar, an increasing number of solar energy developments are being built, including large-scale ground-mounted solar and private rooftop installations in addition to utility-scale solar.
Solar power plants are becoming an increasingly attractive long-term investment. This article will explain what solar farms are, how much they cost, how much revenue they can generate, and what facts you should be aware of before starting a solar farm development project in your area.
What is a Solar Farm?
Solar farms are photovoltaic power stations that are made up of photovoltaic panels (PV), also known as solar panels. Photovoltaic panels (PV) generate electricity by converting sunlight into electricity. Their means of obtaining solar energy and harnessing its power are solar collectors and harvesters. Rooftop solar systems and commercial solar power systems are vastly different from the solar farms in question.
Solar farms, which are also known as solar parks and solar power stations, are typically comprised of ground-mounted solar panels installed across large areas that operate as power plants, generating electricity and supplying it to a power grid that is used to supply electricity to customers.
Uses for Land for Solar
Large solar projects can be organized in a variety of ways; for example, they can be set up as community solar farms or solar farms on a large scale for a utility company. Large solar energy consumers may also construct their own solar farms, either on-site or off-site, that are solely for their own use.
Through the use of community solar, people can generate electricity from the sun even if they do not own property or roofs. This is accomplished by distributing the electricity generated by the solar power plant among multiple properties. Because they receive electricity generated at a lower cost than the prices charged by their utility companies, the members of the community share in the benefits of solar energy and save money on their utility bills.
How Much Do Solar Farms Cost?
A thorough investigation must be conducted prior to the construction of a solar farm. The investor must be aware of the amount of capital that will be required as well as the typical costs associated with this type of solar installation.
At the utility level, an investment of at least $1 million is required for a 1 MW solar farm that can generate enough electricity to power approximately 200 households. Because of factors such as location and available sunlight hours, costs for solar installations on this scale can vary considerably. In general, the cost per watt for solar installations on this scale is around $1.00 per Watt, resulting in an investment of approximately $1 million to build a 1 MW solar farm.
Financing Options for Solar Farms
An installment loan can be used to pay for the installation of the solar panels. To encourage the purchase of solar panel systems, some states, non-governmental organizations, and utility companies offer subsidized solar loans with low interest rates. Yet another option is to form a cooperative group and allow people from different parts of the community to both invest in and benefit from the scheme. The land can be purchased by investors who have the necessary funds on their hands.
If purchasing the land is not an option, leasing the required area of land is the next best option. The leasing agreement should be set up for a long-term period, on average 40 to 50 years, to ensure that the land is not repossessed. In this way, a maximum return on investment can be achieved because the solar panels will not be dismantled too soon after installation.
Factors Impacting Solar Farm Lease Rates
Solar energy production has a significant advantage in that it is predictable and consistent over time, unlike other forms of energy production. As a result, fixed rental rates on an acre basis are the most common structure used in rental contracts for solar farm land leases at utility-scale, with terms ranging from 15 to 50 years. Fixed rental rates on an acre basis are the most common structure used in rental contracts for solar farm land leases at utility-scale. Rents can, however, vary significantly depending on the size of the project, the price of land, substitute uses, and the supply and demand of solar sites in a given region.
Compared to larger power plant projects spanning hundreds of acres in the same region, solar rent on small sites is almost always higher than on large sites. For small-scale projects, tenants must pay more to gain access to existing infrastructure and grid interconnection, which increases the cost of the project. However, it is also necessary to overcome landowners’ reluctance to engage in a small-scale energy project rather than a large-scale development. Also of note is that even within a single state, the variance in land prices can be significant, and that these variations are primarily determined by the more common uses for which the land is put to use. Land lease negotiations must take into consideration the profits that a landowner can expect to make on their acreage in its current use, and the tenant must adjust their offer in accordance with this understanding. Lastly and most importantly, the greater the demand for land, the greater the increase in rental prices.
It is the initial investment that will determine the long-term value of any solar installation, and purchasing the system upfront ensures the highest possible return on investment. However, if this is not your first choice, a solar loan that is subsidized or even requires no money down can still result in savings of $10,000 or more.
Factors that Impact Solar Farm Revenue Potential
The following are the factors that have an impact on solar farm revenue at the highest level:
- Availability of natural light (solar irradiation)
- The location of the farm (i.e., state rules)
- Interconnection structure between the utility and wholesale markets
- The value of solar RECs in the area
- The availability of solar ITC
- Incentives from the state
Due to the recurring revenue, the revenue from the solar farm is worth the investment because it will pay dividends for many years. In exchange for Power Purchase Agreements with the utility companies or a private offtaker, the solar panels will generate electricity that will be sold to them (PPA). The total return on investment is naturally influenced by a number of factors, including the size of the plot available for infrastructure, the location of the installation, and the amount of solar radiation received annually.
A solar farm’s ideal location should be surrounded by open space and receive sunlight throughout the year to produce the greatest amount of electricity possible. If at all possible, any obstructions that cast a shadow on the land should be removed from the site. It is also necessary for solar development to be connected to the electrical grid in order for the generated electricity to be distributed to consumers. As a result, the proximity of the land to critical infrastructures such as roads and electricity grids should be taken into consideration during the evaluation procedure. The construction of infrastructure components such as the ones mentioned above is extremely expensive, and they may be subject to local regulations. As a result, developers are advised to select land that already has all of the necessary infrastructure in place. The layout and characteristics of the land on which a solar farm is to be built are critical considerations before constructing a solar farm. Depending on whether the land is unstable, difficult to build on, or covered with other debris and obstructions, it may be necessary to make an additional investment to clear the land. To summarize, the return on investment is highly dependent on the manner in which the investment was made as well as the amount of money that was initially invested.
While solar developers are frequently eligible for tax breaks and other financial incentives offered by public utilities and governments in order to encourage the deployment of renewable energy sources, solar developers are not always so fortunate.
Expert: The Investment Tax Credit (ITC) in the United States will be phased out in the near future. The period 2020-2021 will be the best time to invest in order to maximize any government and/or state credits available.
For example, some federal states provide tax breaks to private investors and businesses in exchange for a portion of the costs of their solar energy investments (investment tax credit). These tax credits can amount to nearly 30 percent of the costs of solar energy development at the time of installation.
Furthermore, states and public utilities may offer cash rebates to solar investors in exchange for the rapid deployment of solar-generated energy during a specified time period. These rebates can amount to up to an additional 20% of the development costs in some cases. These rebates contribute to the achievement of regional objectives to increase the proportion of renewable energy sources in their official energy mix.
Some states in the United States have passed legislation requiring their energy generators to produce a specific amount of electricity from solar energy. To meet these legal requirements, utility companies will purchase so-called solar renewable energy certificates from other solar developers, who in turn receive these certificates in proportion to the amount of electricity generated by their solar-powered installations. Private investors can trade their certificates for cash and receive a significant amount of additional income each year, while public utilities can use the electricity generated by the investor to meet their legal obligations.
As special measures to increase electricity produced by solar power sometimes states or public energy producers also pay a Feed-In-Tariff (FIT) to solar investors per kilowatt-hour of electricity a solar installation generated. Prior research should be conducted to determine whether these performance-based incentives require the solar developer to use equipment that is manufactured in the local area.
Important Terms for Solar Farm Development
Solar Panels Per Acre of Land
The number of solar panels that can be installed on an acre of land is determined by the way the panels are mounted and the type of solar panels that are used. High-efficiency monocrystalline solar panels generate more power per unit of surface area than lower-efficiency monocrystalline solar panels. Polycrystalline solar modules, which are commonly used in solar farms, produce less energy in the same amount of space as monocrystalline solar modules.
Solar Farm Acres Per Megawatt
When calculating the amount of land required for solar plant installation, it is necessary to take into consideration all of the objects that will take up space within the facility. The solar panels and the structural components are the two most significant items that take up valuable floor space.
The solar farmland requirements, for example, will be 4 to 5 acres for a 1 MW solar power plant installation assuming that every kilowatt of solar energy requires approximately 100 square feet of space.
Solar Megawatts Per Acre of Land
The efficiency of the solar panels as well as the efficiency of the technology have an impact on the calculation of the amount of space required. In terms of the amount of solar energy produced per acre, a solar development that produces an average of 1 GWh per year would require approximately 2.8 acres of land. Taking this into consideration, the plant generates an average of 0.357 GWh or 357 MWh of electricity per year per acre of land it occupies.
Solar Farm Revenue Per Acre
Sales of solar-generated energy to consumers generate revenue, which is determined by the amount of money invested in the solar farm as well as the price of electricity at the time of sale.
Solar Farm Profit Per Acre
According to Landmark Dividend, the average profit per acre of solar farm land ranges between $21,250 and $42,500. Naturally, the figures differ significantly from one project to the next.
Solar Farm Cost Per Acre
There in United States, the average cost of a solar farm per acre is approximately $500,000.
Solar Farm Lease Rates Per Acre
Rates are subject to change. When considering where to build a solar farm, specific site characteristics are more appealing, such as clear, south-facing land with access to infrastructure and in close proximity to the substation, among other things. Leasing a 1-acre solar farm in the United States costs on average about $500 per month, according to industry estimates. Consequently, the land cost for a one megawatt plant will range from $2,500 per month on average to up to $2,500 per month.
Building a Solar Farm: Questions to Ask a Solar Developer
How many acres of land do I need?
The number of acres required for a solar farm varies depending on the size of the power plant itself as well as the efficiency of the solar panels being utilized. In general, at least 5 acres of land are required for a solar farm with a capacity of 1 MW, not including the amount of space required for additional equipment.
How will solar panels be kept clean?
Water sources or other cleaning options are required in order to maintain the efficiency of solar panels that are located so close to the earth’s surface. The best way to clean solar panels properly and remove dirt from them is to use warm water and soap, followed by a soft cloth or sponge to clean the solar panel’s surface. When it rains, the panels are not adequately protected from dirt. When solar panels are professionally cleaned, they produce 12 percent more electricity than when they are not.
How many panels can I put on this acreage of land?
The number of solar panels that can be installed on an acre of land is determined by the way the panels are mounted and the type of solar panels that are used. Highly efficient solar technology can generate more output from the same amount of land than less efficient solar technology.
In terms of financial return, solar investments are a very attractive investment category. The return is consistent and can be ensured by selling the electricity generated at a reasonable price to a public utility or other third party. Nonetheless, because of the high initial capital investment, some financial planning is required to pass the time until the solar farm begins to generate a profit â just as with any other investment, solar development necessitates consideration of the investment horizon and risk tolerance of the investor.
Because the amount of energy generated by renewable energy sources is increasing, now is an excellent time to make a solar energy investment. The options are numerous, and constructing a solar farm is the most financially sound investment.