Can Solar Energy Save Money for your Farm or Business? Tips to Separate Fact from Fiction

Advances in technology and policy mandates that require the installation of photovoltaic (PV) solar have contributed to the reduction of system costs. In recent years, both the power and efficiency of solar panels have steadily improved, while the cost of solar panels have dropped dramatically. According to the National Renewable Energy Laboratory, the average cost to install a commercial PV solar system in the United States has decreased from $5.23 per watt (DC) in 2009 to $2.13 per watt (DC) in 2016[i]. The declining cost of equipment and installation makes installing a solar system enticing for many agricultural producers, and PV panels are an increasingly common sight on farms across Ohio.

The declining cost of installing a PV solar system is enticing for many agricultural producers. However, while solar may provide an attractive payback on some farms, every farm is unique and evaluating the financial viability of investing in solar requires careful consideration of system design, costs, and modeling assumptions.

Key Steps in Project Evaluation:

  • Plan and prepare – Be curious and careful! Investing in on-farm PV solar requires a significant up-front investment that will involve numerous contracts, spanning decades. It is important to review resources and conduct a detailed project assessment before signing any paperwork.
  • Compare and contrast – Secure three or four project quotes to analyze various proposals and modeling assumptions (e.g., system production, net excess generation, energy escalation, incentives, operations and maintenance costs).
  • Research and review – Understand the equipment and shop around! Just as tractors and agricultural equipment have unique features, not all solar projects are created equal. Investigate your various proposals and identify the key difference between the system design, equipment, and warranties (e.g., type and efficiency of solar panel, string inverters or micro inverters, panel warranty, inverter warranty, installation warranty, ground mount or rooftop design, galvanized or stainless fasteners).
  • Discuss and debate – Review the project proposals with your utility provider and your tax professional to evaluate the project assumptions, contracts, and financial implications and/or benefits.

Extension Resources – Solar Electric Investment Analysis Bulletin Series 

Solar Bulletin SeriesEvaluating the financial investment in solar requires careful consideration of system costs, the value of production, and operation and maintenance costs. Unfortunately, some proposals are hard to understand making it difficult to make fully informed investment decisions. To help simplify the key considerations of evaluating a PV solar project, the University of Wyoming and Ohio State University partnered to develop a bulletin series that clarifies the information and assumptions that are essential to the assessment process. The bulletins listed below, are structured as a six-part series arranged to systematically progress the reader through the project evaluation process.

Part 1: Estimating System Production – Site-specific factors such as shading, orientation, tilt, temperature, and panel degradation can influence the amount of electricity produced by a PV solar system.

Part 2: Assessing System Cost – A better understanding of direct system costs, indirect capital costs, operations and maintenance, and standard assumptions provides a more accurate financial analysis, fostering informed investment decisions.

Part 3: Forecasting the Value of Electricity – To calculate energy savings for a project, one must consider important variables, including the details of the individual rate structure and the assumed energy escalation rate that influence the value of electricity a PV system produces.

Part 4: Understanding Incentives – Despite declining costs for PV solar, there are various federal, state, and local incentives which greatly affect the financial viability of a PV installation.

Part 5: Conducting a Financial Analysis – Understanding the solar resource production, system cost, value of electricity, and available incentives enables a robust financial analysis. Accurately evaluating the viability of a solar project requires understanding financial concepts such as simple payback, net present value, and the levelized cost of energy.

Part 6: PV Solar Example – The National Renewable Energy Laboratory developed the System Advisory Model (SAM) to help developers, installers, and potential system owners estimate the system production and financial impacts of renewable energy projects.

These materials are designed to increase participants’ knowledge of PV solar energy development and the financial considerations to guide informed decision-making with future investments. This six-part bulletin series and additional materials are available for download at: energizeohio.osu.edu/farm-solar-energy-development.

Interested in Learning More?….Join Us at Farm Science Review!

The 2017 Farm Science Review (FSR) will be held September 19-21 at the Molly Caren Agricultural Center near London, Ohio. Farm Science Review offers visitors the opportunity to learn about the latest agricultural innovations from experts from the College of Food, Agricultural, and Environmental Sciences at The Ohio State University. The Small Farm Center at the Farm Science Review features 27 educational programs suited to smaller farms, with particular emphasis on alternative enterprises, alternative production systems and alternative marketing strategies.

If you plan to attend the FSR and are interested in additional information on solar energy in agriculture, please join us for the 50-minute presentation titled, Considerations for Investing in Solar Energy for Your Small Farm on Thursday September 21, at 12:00 p.m. at the Small Farms Center Tent located at the corner of Corn Avenue and Beef Street.

For additional information, please click here to review a complete list of educational sessions and demonstrations offered at the 2017 Farm Science Review.

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[i] Fu, R., Chung, D., Lowder, T., Feldman, D., Ardani, K., and Margolis R. (2016).  U.S. Solar Photovoltaic System Cost Benchmark: Q1 2016, National Renewable Energy Laboratory (NREL).

 

Eric Romich is an Assistant Professor & Extension Field Specialist for Energy Development with OSU Extension.

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