The solar power bonanza
Sandy and Greg Brummond know a good deal when they see one. Five years ago they cashed in on incentives offered on solar systems and invested in a $39,000 solar array that sits atop their farm shop near Craig, Nebraska.
The payoff was twofold for the Brummonds. Their current system (which can be expanded) generates 43% of the electricity their farm and home uses. Second, their solar array came with financial help. “To offset some of the cost, we got a $9,000 federal grant,” Sandy Brummond explains. “We also qualified for a 30% federal tax credit that offset $12,000 from the purchase and installation cost.”
The Brummonds’ experience confirms that farmers have a front-row seat in one of the hottest energy acts in the nation. Wind power is the current darling of the exploding alternative energy industry. That industry is dominated by utilities mining government incentives to install massive wind tower arrays, for which successful applications are geographically limited.
Unfettered by geographic restrictions, solar arrays can create electricity almost anywhere in the country. Furthermore, they are not restricted by size. Anyone with a south-facing roof or ample land can generate their own electricity, potentially selling excess generation to a utility (see “Getting Paid for Excess Electricity”).
Spurring investment in private systems are incentives that substantially offset the cost of buying a solar array (see “Mining Solar Incentives”). Those enticements have diminished slightly of late. But Graham Christensen expects that the political bipartisan support solar energy enjoyed in the past along with a recommitment to incentive programs by the new administration will enhance funding in the near future.
Christensen knows firsthand the possibilities of solar for agriculture. His family farm near Lyons, Nebraska, invested in two solar arrays. One is a 5-kilowatt roof-mounted system and the other is a 20-kilowatt freestanding array. Combined, these arrays generate about 27,000 kilowatt hours (kwh) of electricity annually.
He also has a business developing and installing alternative energy projects for individuals, farms, municipalities, and large commercial ventures (often involving power utility firms).
Financial incentives have been reduced recently, Christensen says, “but they can still contribute a substantial amount to the investment costs in a system. And I expect the growth of alternative energy, and especially solar energy, is going to be explosive in the future, which will lower costs further.”
Costs have already fallen. Solar components pricing is down more than 80% during the past seven years, according to the National Rural Electric Cooperative Association.
Christensen sees an even wider margin of cash flow potential for solar systems. He also predicts the possible emergence of a trend for farms to become energy producers working in cooperation with local utility providers.
"From a national-security perspective, having more localized and widely dispersed systems of energy generation makes sense," Christensen adds.
The Solar Electric Investment Analysis Series, a comphrensive guide on investing in solar generation written by Eric Romich of Ohio State University and F. John Hay of University of Nebraska-Lincon, can be assess at projects.sare.org/information-product/solar-electric-investment-analysis-series-2/.
Mining solar incentives
Many grants, loans, and tax credits are offered to offset the lion’s share of solar array costs.
There are myriad financial incentives available that, if combined, can cover as much as 70% to 75% of the bill for investing in solar. These incentives do not include the electricity savings and potential utility company credit from farm generation (see “Getting Paid for Excess Electricity”).
Some of these incentives, such as the USDA’s REAP grants and loans as well as federal tax credits, are applied nationwide. Other tax credits, property tax exemptions, and rebates vary by region and state. Following is a brief explanation of these incentives.
The Rural Energy for America Program (REAP) provides financial assistance to purchase, install, and construct renewable energy systems for up to 22% of a solar project’s cost. REAP loans can cover up to 75% of the cost of a project. The combined amount of a REAP grant and loan guarantee must be at least $5,000 (with the grant portion at least $1,500) and may not exceed 75% of the project’s cost.
Warning: The 100-plus-page application and process are extensive, says Rory Piermattei, a loan specialist with the Pennsylvania USDA REAP program. “But a guaranteed REAP loan makes your banker sleep better at night, so it’s worth the time and effort to apply,” he says.
Many state USDA REAP and energy offices offer help in applying for a grant or loan (go to rd.usda.gov/files/RBS_StateEnergyCoordinators.pdf). You also can hire a grant writer familiar with the program to assist in completing an application. Grant writers will conduct a prereview scorecard of your system, which can save time in your application, points out Sarah Conley-Ballew of Rural Action’s Sustainable Energy Solutions program (ruralaction.org).
Deadlines for REAP applications are March 31 and November 2. For more information, go to rd.usda.gov/programs-services/rural-energy-america-program-renewable-energy-systems-energy-efficiency.
State alternative energy loan programs. Your state may also offer zero- or low-interest loans for the development of alternative energy production projects. For example, Iowa offers an alternative energy revolving loan program that provides a minimum amount of $25,000 and maximum amount of $1 million to cover up to 50% of eligible project costs. Contact your state’s energy office for more information.
Federal Solar Investment Tax Credit (ITC)
This credit allows you to deduct up to 22% of your project’s cost from your federal taxes. If you don’t have enough tax liability to claim the entire credit in a single year, you can carry the remainder over the following 20 years.
State-based tax credit
This tax credit varies widely by state. For example, Iowa has a solar tax credit of 15% of the cost of a project ($5,000 limit). Remaining credit can be carried over for up to 10 years.
The Modified Accelerated Cost Recovery System (MACRS) allows farm businesses to deduct 85% of the value of qualified solar equipment over a five-year period. Talk to your accountant about MACRS and find additional information at seia.org/initiatives/depreciation-solar-energy-property-macrs.
Property tax exemption
Installing solar panels increases your property’s value, but some states offer an exemption for solar systems. For example, Iowa offers a 100% property tax exemption for five years.
Solar energy sales tax exemption
Again, depending on your state, you may be exempt from paying sales tax on solar system equipment; have your accountant check.
Finally, some states, municipalities, and utility companies offer incentives in the form of rebates and equipment discounts.
Sandy and Greg Brummond’s 34-panel solar array rests atop the south side of their shop’s 30×50-foot roof, generating up to 10 kilowatts of power for their 2,500-acre operation. “The roof has about a 6-to-1 pitch,” Greg explains, adding that this is enough to prevent snow from collecting on the roof and interfering with the panels. Fixing the panels on the roof offered aesthetic and logistical benefits for the Brummonds. “We like the look of the array on the roof,” Sandy says. “It doesn’t take up space in our yard, and we don’t have to mow around it like we would if the array was freestanding.”
The 10-kilowatt system produced about 13,000 kwh of electricity in 2019. “That’s about 43% of the electrical energy we used on our farm and in our home last year,” Greg explains. “Our shop draws the most electrical energy on the farm.”
When they installed it in 2015, the cost of the system was $39,000. “We went with U.S.-made solar panels, which we understand are more expensive. And we had the electrical components sized so that we can eventually expand to a 20-kilowatt system,” Greg says. Net metering provided by their power supplier, Burt County Public Power District in Nebraska, gives the Brummonds credit on the energy they generate. The net difference between how much energy flows back on the utility’s system or flows to their farm from the utility is credited or billed to the Brummonds.
What size solar system?
Answer: It depends.
Determining the right size for your property starts with digging out your last 12 months of power bills. The aim of this accounting is to establish average monthly and annual consumption used in calculating:
- Total annual kwh
- Average monthly kwh
- Seasonal kwh (winter vs. summer, for example)
These figures provide baseline estimates that help in deciding how much power you want to derive from a solar array.
Other factors to consider in establishing the ultimate size of a solar system include:
- How much money can you afford to invest?
- How much space (roof or land) is available to accommodate the array?
- Does your utility provider have capacity limits restricting system size?
- What are future expansion plans for the farm that would increase electricity consumption?
- Is your electric usage fairly consistent or variable?
A guide to sizing arrays, “Estimating the Size of Your Solar Electric System,” can be found at energizeohio.osu.edu.
Getting paid for excess electricity
On the surface, net excess generation (NEG), also known as net metering, seems simple. Electricity generated by a solar array not used on the farm flows into the power grid to earn credit. “Each electric bill will indicate the net amount of electricity for that billing period (electricity used and produced),” explains F. John Hay of the University of Nebraska-Lincoln. “If there is net excess generation, the utility will apply a credit (in kilowatts or dollars) to the electric bill to offset charges in future months.”
How much credit you receive, however, varies greatly by your location.
For example, private (not public) utilities in Iowa must provide customers with net metering where 100% of the excess electricity a farm system generates receives a 100% credit at retail rates to offset future electric costs.
Just 29 states require such full retail net metering while other states require utilities to compensate customers at an “avoided” cost rate (which can be substantially lower than full retail rate). South Dakota and Tennessee do not have any form of net metering.
You can discover your state’s NEG policy in the Solar Net Metering Guide on the Solaris Technology blog.
Solar array building blocks
Solar systems can vary in size from single-kilowatt panels to mega-kilowatt arrays. Regardless of size, a system’s basic components remain the same and include:
- Solar panels. Also called modules, these consist of a series of photovoltaic crystalline silicon cells wired together in a series, encapsulated under tempered glass, and surrounded by a steel or aluminum frame. Panel output is given in watts. “Panels are warrantied for 25 years [an industry standard] but can produce electricity longer than that,” notes Autumn Long of Solar United Neighbors (solarunitedneighbors.org). “Maintenance is low since there are really no moving parts. In most parts of the country rainfall is enough to keep the surface of the panels clean. And the sun is enough to melt all but excessive snowfalls.” Production does slowly degrade over time but often less than 0.5% a year.
- Racks and pedestals. Racks are often made of aluminum while pedestals are steel. The panel mounts can be installed on a roof or the ground and are either fixed (panels are preset for height and angle and don’t move) or track. Tracking arrays automatically adjust their angle to maintain optimal exposure to the sun.
- Inverter. This device converts the direct current (DC) generated by solar panels into alternating current (AC). Inverters are warrantied for 10 to 25 years depending on their type.
- Meter. Some utilities require the installation of a meter that runs both forward and backward to account for the current consumed or generated by an array. Other utilities require two separate meters – one for incoming power and another accounting for electricity that goes into the grid. “Some rural utilities may require insurance policies before they will grid-tie a system,” says Eric Romich of the Ohio State University. Meters are sometimes paid for by the utility company but are more often paid for by the farmer. “Publicly owned utilities may charge as much as $1,000 to replace a one-way with a two-way meter,” Romich adds.
- Battery backup. Backup battery systems are offered in flooded lead-acid (FLA), sealed absorbed glass mat (AGM), and sealed gel cell design. Flooded lead-acid batteries offer the lowest cost per amp-hour of storage and have the longest life (often as long as 10 years). However, FLAs do require more maintenance.
Possibilities, perils of solar leases
Rapidly expanding interest in solar is presenting farmers with an opportunity for long-term leases. While these are attractive, farmers considering such long-term leases may take ground out of production for decades. “These sorts of contracts require careful consideration,” urges Todd Janzen of Janzen Ag Law (aglaw.us). When considering a long-term lease, he advises getting the help of an attorney and weighing these questions.
- Is the developer paying enough to close the door on competitors? A solar lease (also called an easement) will likely tie up property for a period of years while the developer arranges permits, funding, and other items necessary for construction. Provided the farmer can continue farming the land, little rent during this period is probably OK, Janzen says, “but consider, too, that the farmland will be taken off the solar leasing market during this period.”
- Do the lease payments account for inflation? A long-term lease should have a built-in rent payment escalator based on the consumer price index (CPI), a regularly posted inflation rate, or a negotiated percentage annual increase.
- Who gets the carbon and tax credits? Likely the solar company will take the credits. “But understand, you may be giving up an enormous upside if these markets take off years from now and companies are willing to pay farmers to sequester carbon as part of their farming activities,” Janzen says.
- Will the developer keep land maintained to your standards? “A field of solar panels seems harmless enough, but what happens if the field is full of noxious weeds that spread onto neighboring fields?” Janzen questions.
- Will the developer provide a removal bond? The lease should spell out the consequences if the solar company goes out of business and leaves a field full of solar panels. “A farmer should insist that the developer provide some form of security that will pay for the cost of removal if the solar company goes bankrupt or disappears. This is a must,” Janzen says.
Bright future in store for farm solar
Farming has a culture of independence, observes Graham Christensen, who farms with his father, Fred, and brother, Brad, near Lyons, Nebraska.
“Farmers are interested in energy independence, and investing in solar is an investment that potentially brings money back to the farm,” he says.
Christensen knows of what he speaks. His family’s farmstead is powered by two solar arrays. One is a 5-kilowatt roof-mounted system while the other is a 20-kilowatt freestanding array.
Combined, the two arrays generate 27,000 kwh annually that “offsets 59% of our farm’s total energy draw,” Christensen says.
The estimated cost of installing a 25-kilowatt system would be approximately $62,500 before tax credits and other financial incentives are deducted, he figures. Given the fact that a solar array enjoys a 25-year life span, the amortized cost of that investment would be $2,500 a year. Dividing that annual cost by 27,000 kwh of electricity generated annually yields a power cost of 9¢ per kwh, Christensen calculates.
But capitalizing on solar incentives to install such an array would drop that cost to 7¢ per kwh. “You can readily see the payoff for farmers,” Christiansen adds.
Farming under solar panels
Solar panels don’t have to take land out of production.
A decade-long research project by the University of Massachusetts evaluated a solar array consisting of three panels vertically stacked and elevated by a racking design that supports the panels 4 to 7 feet off the ground.
The panel clusters were spaced to 2 to 5 feet apart, permitting sunlight to reach grass growing beneath the panels.
“Every spot beneath the panels gets about two-thirds of the full amount of sunlight throughout the day,” explains university agronomist Stephen Herbert of the project’s 17-kilowatt installation.
A similar elevated panel cluster is in commercial product from Hyperion Systems (hyperionsystemsllc.com). Costs of elevated solar arrays vary widely, ranging from $2 to $5 per watt.
“The area underneath the panels produced 90% to 95% of the yield of the pasture area not covered by solar panels,” Herbert says. “Also, on hot summer days cattle can lie down in the shade underneath the panels.”
Research results suggest that growing crops and generating energy make good partners.
“If farmers are planning on installing solar panels or are approached by a solar company hoping to develop their land into a solar farm, they should do it in such a way that they can keep agriculture going on the land,” Herbert adds. “They can continue to earn an income from farming in addition to the revenue earned from solar energy.”
The Massachusetts project is also researching producing vegetables and other crops under the panel array.