Solar Farms Guide for 2021: Cases, Land Requirements, Financing, Costs, How To

Solar Farms GuideElectricity generated from solar power has been on the rise over the last decade and is one of the fastest-growing renewable energy sources in the U.S. This technology is the pillar allowing for a 24/7 clean energy economy.

More and more solar energy developments have been set up with large-scale ground-mounted solar and private rooftop installations alongside the utility-scale solar.

Solar farms are an attractive long-term investment these days. This article will describe what solar farms are, how much they cost, outline their revenue potential and give important facts to know when starting a solar farm development.

What is a Solar Farm?

Solar farms are photovoltaic power stations consisting of photovoltaic panels (PV), also known as solar panels. Their means are to collect solar energy and to harvest the power of the sun. These farms are remarkably different from rooftop solar systems and commercial solar power systems.

Also known as solar parks and solar power stations, solar farms usually consist of ground-mounted solar panels installed across large areas operating as power plants, generating electricity and supply it to a power grid to consumers.

Uses for Land for Solar

Solar farmLarge solar projects can vary in their types, for example they can be set up as community solar farms or solar farms at utility-scale. And sometimes large solar energy consumers build their own solar farms purely for their use – onsite or off-site.

Community solar allows people to generate electricity from the sun even if they do not own property or roofs by sharing the electricity of the solar power plant between more than one property. The members of the community share the benefits of solar power and save costs by receiving the generated electricity which costs less than the prices offered by their utility companies.

How Much Do Solar Farms Cost?

Before starting a solar farm, sound research needs to be carried out. The investor must know how much capital is to be invested and what are the typical costs of this type of solar installation.

Rule-of-Thumb Cost

For a 1 MW solar farm at utility level investment of a minimum of $1 million is needed, which can generate electricity for around 200 households. The costs, of course, can differ because of location and available sunlight hours, but in general, the cost per watt for solar installations at this scale is around $1.00 per Watt, which amounts to an investment of roughly $1 million to install a 1 MW solar farm.

Financing Options for Solar Farms

The installation of the panels can be funded through a loan. Some states, non-government organizations or utility companies offer subsidized solar loans with reduced interest rates to finance the purchase of solar panel systems. Another option is to create a cooperative group and allow members of the community to both invest in and benefit from the scheme. Those investors who have the necessary capital can purchase the land.

If the purchase is not desirable, leasing the needed area of land is the second option and the leasing agreement should be ideally set up for a long-term period, on average for 40 to 50 years. This will ensure a maximum return on the investment as the solar panels will not have to be dismantled too early.

Factors Impacting Solar Farm Lease Rates

The great advantage of solar energy production: It is predictable and consistent over time. Thus, fixed rental rates on a per-acre basis are the most common structure used in rental contracts for solar farm land leases at utility-scale and range in terms anywhere from 15 to 50 years. But rental rates can vary depending on the Project Size, Land Prices, Substitute Uses, Regional Supply and Demand of Solar Sites.

Solar rent is almost always higher on small sites compared to larger power plant projects spanning hundreds of acres in the same region. Tenants pay more for small scale projects in order to get access to the existing infrastructure and interconnection to the grid. But also, to break landowner’s resistance to take on a small-scale energy project than a large-scale development. Additionally, even within states, the variance of land prices can be large and are mainly calculated by the more common uses of the property itself. When negotiating a land lease, the tenant must understand the profits a landowner can expect to make on their acreage in its current use and alter their offer accordingly. And of course, the higher the demand for land, the higher the rental prices.

The long-term value of a solar installation will largely be defined by the initial investment and purchasing the system upfront guarantees the best return on investment. If this is not the preferred option, a subsidized or even $0-down solar loan can still provide savings of $10,000 or more.

Factors that Impact Solar Farm Revenue Potential

At a high-level, the factors that impact solar farm revenue is the following:

  • Sunlight availability (solar irradiation)
  • Location of farm (i.e., state rules)
  • Utility/wholesale market interconnection structure
  • Solar REC values in the area
  • Solar ITC availability
  • State incentives

The revenue on the solar farm is worth the investment as the recurring revenue will pay dividends for years. The solar panels will be used to generate electricity to be sold to the utility companies or to an private offtaker via Power Purchase Agreements (PPA). The total return on investment naturally depends on several factors, such as the plot available for infrastructure, location of the installation, and the amount of solar radiation per year.

The optimal land where the solar farm is built should receive sunlight all year round in order to produce as much electricity as possible. Any obstructions that causes shadow on the land should be removed, if possible. Also, solar development needs a connection to the electrical grid in order to supply generated electricity to consumers. An important factor of the evaluation process therefore should be how close the land is located to crucial infrastructures such as access to roads and electricity grids. Infrastructure components as these aforementioned are incredibly expensive to build and might be subject to local regulations. So, developers are advised to select land that does provide all the needed infrastructure already. Important to consider before setting up a solar farm is the layout and features of the land in question. If the area is unstable, difficult to build on, or covered with other debris and obstructions, this could make an additional investment necessary to clear the land. In conclusion, the return on investment is highly dependent on how the investment was made and how much was invested in the first place.

However, in order to foster deployment of renewable energies, solar developers are often eligible for tax reductions and other financial incentives offered by public utilities and governments.

Expert: The Investment Tax Credit (ITC) will be expiring soon in the U.S. 2020-2021 will be the best time to invest to maximize any government and/or state credits.

For instance, some federal states offer private investors and businesses a reduction of their taxes in order to trade off a part of their solar investment costs (investment tax credit). These tax credits can amount up to almost 30 percent of the initial solar development costs.

Furthermore, sometimes states and public utilities offer cash rebates to solar investors for quick deployment of energy generated by solar during a certain time period and equal up to another 20 percent of the development costs. These rebates help to meet regional goals to strengthen the representation of renewable energies in their official energy mix.

Some U.S. state legislations set the goal for their energy generators to produce a specific amount of electricity from solar energy. Thus, in order to meet these legal requirements, utility companies will buy so called solar renewable energy certificates from other solar developers, which gain these certificates in proportion to the electricity generated by their solar installations. This way, private investors can trade their certificates for cash and receive a remarkable, additional income per year and public utilities count the electricity generated by the investor towards their legal requirements.

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. The best is to research beforehand if these performance-based incentives require the solar developer to install locally manufactured equipment.

Important Terms for Solar Farm Development

Solar Panels Per Acre of Land

How many solar panels fit an acre of land depends on the way they are mounted and what type of solar panels are used. High efficiency mono-crystalline solar modules generate more power per given area. Polycrystalline solar modules are commonly used in solar farms and generate less energy in the same area.

Solar Farm Acres Per Megawatt

When calculating the land size needed for solar plant installation, one must take into account all the objects that will consume space in the facility. The two main items that preoccupy space are the solar panels and the structural components.

For example, for a 1 MW solar power plant installation, the solar farmland requirements will amount to 4 to 5 acres, assuming every kilowatt of solar power requires about 100 square feet of space.

Solar Megawatts Per Acre of Land

The calculation of the space needed is also influenced by the efficiency of the solar panels and the efficiency of the technology. Estimating the solar energy generated per acre, a solar development that on average produces 1 GWh per year, requires around 2.8 acres of land. Taking this into account, on every acre, the plant produces an average of 0.357 GWh or 357 MWh of electricity per year.

Solar Farm Revenue Per Acre

The revenue generated by the solar farm depends on the initial investment costs and electricity prices gained by selling the generated energy to consumers.

Solar Farm Profit Per Acre

Landmark Dividend stated the average solar farm profit per acre ranges between $21,250 and $42,500. Quite naturally these figures vary widely on a project-by-project basis.

Solar Farm Cost Per Acre

The solar farm costs per acre in the U.S. constitute typically $500,000.

Solar Farm Lease Rates Per Acre

Rates can vary. Specific site characteristics are more attractive for building a solar farm, such as clear, south-facing land with access to infrastructure and in close proximity to the substation. In the United States, 1-acre solar farm costs on average about $500 per month to lease. Therefore, the cost of land for 1 MW plant will be up to $2,500 per month on average.

Building a Solar Farm: Questions to Ask a Solar Developer

How many acres of land do I need?

The acres need for a solar farm differ depending on the scale of the power plant itself and the efficiency of the panels used. In general, for a solar farm of 1 MW at least 5 acres of land are needed, including the amount of space for additional equipment.

How will solar panels be kept clean?

In order to maintain the efficiency of the solar panels that are situated so close to the ground, water sources or other cleaning options are important. In order to clean solar panels properly and clear it from dirt is to use warm water, soap and then clean the surface of the solar panel with a soft cloth or sponge.  Rain is not able to properly the panels from dirt. When professionally cleaned, the solar panels have a 12% higher output of electricity.

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

How many solar panels fit an acre of land depends on the way they are mounted and what type of solar panels are used. Highly efficient solar technology can generate more output on the same number of acres.

FAQs about Solar Farms

Are solar farms profitable?

Yes, solar farms are profitable. The potential profit varies widely based on where you are located, how much land, how many panels can be added, and incentives in your specific state.

Are solar farms dangerous?

No, solar farms are not dangerous. World-class engineering goest into build a farm with proper equipment, such as circuit breakers, transformers, and more. Farms are built to last a very long time and are rugged structures.

Last Words

Solar investments are a financially attractive investment category. The return is steady and can be secured by selling the generated electricity for a good price to a public utility. However, the initial capital investment is high and some financial planning is needed to pass the time until the solar farm is gaining return – just like any other investment, solar development requires consideration of the investment horizon and risk tolerance.

As energy generated by renewable energy sources is on the rise, the time to invest in solar energy is now! The choices are not limited and building a solar farm is the most viable investment.


Written by Carlos Huerta

Electrical Engineer with background in solar PV designs for residential and commercial projects as well as power systems development. Fan of renewable energy topics and projects. Technical writer for papers, articles and research in related topics to sustainability and especially solar power. Follow Carlos on LinkedIn.