Guide to Building and Investing in Solar Farms

Solar technology will be a large piece of any clean energy economy. In recent years, large-scale ground-mounted solar arrays, private rooftop installations, and utility-scale solar farms have increased dramatically in both popularity and productivity.

Solar farms can be community-owned or private, small or large-scale. Large-scale installations cost around $1 per watt of power generated, with a 1 MW farm (powering 200 homes per year) requiring an initial investment of around $1 million. Factors contributing toward the success of a solar farm include proximity to existing infrastructure, sunlight availability, land lease rates, and state and local incentives.

As attitudes toward the climate crisis change, solar farms become more attractive long-term investments. This article describes what solar farms are, how much they cost, their revenue potential, and other details before investing in one.

What Is a Solar Farm?

Solar farms are renewable power stations with large arrays of photovoltaic (PV) solar panels. Compared to domestic solar arrays installed on a home rooftop, solar farm panels are usually ground-mounted. They feed electricity directly to the power grid. From there, consumers can access renewable energy to power their homes.

Types of Solar Farms

Solar farms come in various forms to suit different needs and scales of operation. Farm types include:

• Community solar farms: These are usually smaller-scale projects that let nearby residents invest in and benefit from solar energy. They’re ideal for homeowners who don’t have the property or space to install domestic solar panels or homes with limited solar viability. Typically, they require less land and are more compact than a utility-scale project.
• Utility-scale solar farms: Larger projects are state-owned or run by a private utility to supplement an existing power grid. These installations often span hundreds of acres and generate enough electricity to power thousands of homes.
• Private enterprise solar farms: Some companies, farmers, and large-scale landowners build solar farms to meet their high energy demands. These installations feed power directly to the property, drastically reducing operating costs and carbon footprints.

How Much Do Solar Farms Cost?

The investment required for a solar farm depends on several factors. Property size and energy demands are primary cost determiners.

Average Cost Per Watt

As a rule of thumb, installing large-scale solar farms costs about $1 per watt. For a utility-scale farm producing one megawatt (MW) of power, the average initial investment would be $1 million. Such a farm would take up 4 to 5 acres and generate enough electricity annually to power 200 homes.

However, the cost per watt can depend on sunlight availability, infrastructure access, and land lease rates. Some sources suggest that the price per watt may reach higher than $2.50 per watt, pushing the cost of a 1 MW farm to $2.5 million.

Financing Options for Solar Farms

Developers with enough capital can self-fund a solar farm. Otherwise, a few financing options are available:

• Subsidized loans: Some states, local governments, and utility companies offer reduced-rate loans for renewable energy projects.
• Cooperatives: Community solar projects are often tied to a solar co-op. Members who use power from the array can invest in the farm in return.
• Land leases: If buying land isn’t feasible, developers may choose to lease over an extended period, with a term often between 40 and 50 years. The longer the lease, the more potential for a good return on investment.

How Much Does It Cost to Lease Solar Farmland?

The great advantage of solar energy is sunlight, an infinite fuel source. With it, solar panels can produce consistent and reliable energy. So, landowners often set fixed rental rates per acre. A lease contract can range from 15 to 50 years, but rates depend on a project’s size, average land prices, solar supply, and power demand.

Rent is usually higher for small-scale installations, such as community solar farms, than large utility or industrial-scale farms over hundreds of acres. The higher rent preserves the operator’s access to infrastructure and as recompense for the landowner, who may prefer to work with larger-scale developers.

Land lease rates vary from state to state and within a given state. Bidders should understand how landowners profit from their property’s current uses and adjust their terms accordingly. The more demand for land, the more a lessee will have to pay to rent it.

How Much Revenue Can a Solar Farm Generate?

A solar farm is guaranteed to produce consistent energy, but the owner will only realize revenue potential once the initial farm investment is paid off.

Smaller solar farms turn a profit sooner because they need less equipment for maintenance. One of the best ways a solar farm investor can get a fast turnaround is to buy equipment through a subsidized loan or one that charges no money down.

Some other unique factors affecting a solar farm’s revenue potential include:

• Sunlight availability: The land must have high solar viability to produce as much electricity as possible. That means the panels should be placed on south-facing land free of shadow-casting obstructions.
• Farm location: Solar developments must be connected to the electrical grid to supply power to consumers. If a solar farm is located further from existing infrastructure, building new infrastructure will cost more and take longer.
• SRECs: State regulations called renewable portfolio standards (RPSes) require utility companies to produce some of their energy from renewable sources. Companies will often buy solar renewable energy certificates (SRECs) from solar farm owners they work with to prove they have met their RPS quota.
• Tax incentives: To promote the continued development of renewable energy plants and farms, including solar farms, the federal government made a system of investment tax credits (ITCs) available to solar developers. These credits eventually phase out, but for installations started before the end of 2022, developers could claim credits of up to 30% on their solar investment.
• Additional incentives: Besides SRECs and ITCs, some states continue to offer private investors and businesses tax cuts in return for solar investments. This may include cash rebates that cover a portion of the initial investment in a solar farm. Feed-In-Tariffs (FITs) in some jurisdictions can also be awarded to investors per kilowatt-hour of electricity their solar farm generates. Some may have caveats, such as requiring locally-produced solar equipment.

Building a Solar Farm: Questions to Ask a Solar Developer

If you’re considering building a solar farm on your land or a solar developer approaches you about creating one, you should ask these questions to clarify the project’s goals and maximize your investment.

How many acres of land do I need?

The acreage required for a solar farm depends on customers’ power needs and the panels’ efficiency. For a solar farm of 1 MW, you’ll need at least 4 acres of land. That includes the space required for additional equipment on top of the panels.

How will my solar panels be kept clean?

Solar panels need to stay clean to run at peak efficiency. Rainwater alone won’t do the job, so you or the developer should be prepared to hire professionals to clean the panels with top-grade cleaning tools and warm, soapy water. Professionally cleaned solar panels output 12% more power than dirty ones, arguably mitigating the cost of hiring a cleaner.

Read also: Solar Panels Needed to Run a Home

How many panels can I put on this acreage of land?

The number of solar panels per acre depends on the type of panels being used and how they’re mounted in the arrays. Monocrystalline panels have higher efficiency and generate more power per acre than cheaper polycrystalline panels from reclaimed materials.

Read also: Breakdown of Solar Panel Costs