A solar farm can turn out to be a great way to increase your revenue with a business model while also safeguarding the interests of the environment.
Moreover, with increasing interest in solar energy and other renewable forms of energy, it is obvious that the demand for solar farms is at its highest.
Thus, many people who may be interested in setting up a solar power system at their home or even in starting a solar farm might wonder whether it is profitable.
Solar farm return on investment (ROI) refers to the financial gains and profitability that can be achieved through the development and operation of a solar energy project.
Various factors, including the initial investment cost, electricity generation capacity, operational expenses, government incentives, and the price of electricity influence the ROI of a solar farm.
Solar farms typically have a long lifespan, often ranging from 25 to 30 years or more, which allows for a steady stream of income over an extended period.
According to Landmark Dividend, the average solar farm profit per acre lands somewhere between $21,250 and $42,500.
Conducting a thorough feasibility study, considering all costs and potential revenue streams, is crucial in assessing the potential return on investment for a solar farm project.
What Is a Solar Farm?
In simple words, a solar farm as it sounds is a large collection of solar panels in a massive area, that produces electricity at a large scale.
In a solar farm, you would usually find at least a hundred or thousands of solar panels on a rack lined up in a pattern to gather the sunlight and be attached to batteries and equipment, producing electricity for use and consumption.
The main motive of a solar farm, unlike a solar energy system in a household, is to ensure profit generation and the distribution of electricity to companies or the government.
Although it is not fixed where solar panels can be installed for a solar farm, generally, these need large areas in abundance where the land can handle the weight of several panels for a long period.
Average Cost of Starting A Solar Farm
The cost per watt for setting up a solar farm and a residential solar system is not the same.
Residential solar systems tend to be more expensive on a cost-per-watt basis due to the complexity and variety of residential installations, which can include factors such as roof type, home orientation, local permitting costs, and aesthetic choices.
On the other hand, solar farms, also known as utility-scale solar installations, typically have a lower cost per watt because they benefit from economies of scale.
They involve the installation of a large number of panels in one location, which leads to lower installation costs per unit and more straightforward logistics.
According to Solar.com, the cost of a fully installed solar system generally ranges from $3 to $5 per watt before incentives like the 30% tax credit.
Therefore, a 5,000-watt (5 kW) solar system would have a gross cost between $15,000 and $25,000.
The Solar Energy Industries Association reported that the average cost for constructing a solar farm, calculated on a per-watt basis, ranged from $0.89 to $1.01 per watt. Hence, the total cost for a standard 1-megawatt solar farm would vary between $890,000 and $1,010,000.
In return, a 1MW solar farm will produce 4000 units daily, 120,000 units per month, and 1,440,000 units annually.
There can be no fixed answer to this question, simply because the prices of fixed assets like land, assets, and even labor including the government taxation policies vary.
If you live in a country or area where these costs are relatively lower, you can expect to pay a much lower price for setting up the solar farm.
Additionally, you must understand that setting up a solar farm is no less than a major investment, which you are making for the future.
In this investment, you have to spend on all the equipment, panels, batteries, space, etc. Since a solar farm generally requires a large amount of area, the cost is high as well.
Cost of Maintaining a Solar Farm
Since there are no moving components and the input fuel (sunlight) is free, the yearly maintenance and ongoing costs are essentially negligible.
The system simply needs minimal preventative and corrective maintenance and module cleaning for maximum working.
However, because batteries need to be replaced every 3-5 years in off-grid systems when they are utilized, the maintenance costs are greater.
Regular monitoring with recorders of data is strongly advised to guarantee high generation and minimal maintenance costs.
Smaller solar PV systems typically have maintenance costs of around 2% of the initial system cost, whereas bigger systems typically have maintenance costs of about 1% of the initial system cost.
In addition, it is advised to have your installation visit your home at least twice a year to assess the system’s overall health.
Average ROI of Solar Farm
The average return on investment (ROI) for a solar farm typically falls between 10% and 20%, depending on factors like local weather, installation costs, farm size, and panel type.
Higher ROIs can be achieved in sunnier climates or with highly efficient solar panels.
On average, a 1-megawatt system covering around seven acres can generate annual revenue of $20,000 to $60,000, though actual profits depend on local utility companies’ payments for alternative energy sources.
How Many Employees Needed for a Solar Farm?
The solar industry, especially solar energy, is becoming more and more significant over time. And for this reason, the solar energy industry is expanding quickly around the world.
In order to manage individuals, technology, research and development, etc., human resources become crucial.
The number of employees needed for a solar farm can vary significantly depending on the size of the solar installation, its complexity, and the specific tasks required.
A small residential solar panel system will require far fewer employees than a large utility-scale solar farm.
A small solar farm producing a few kW may only need one employee to run successfully. That changes when dealing with medium-sized solar farms.
It will require around 4 people working in two shifts. However, the number may increase slightly during service time.
How Long Does It Take To Make a Return?
The return on investment (ROI) for a solar farm typically begins after the initial costs are paid off, which usually takes five to ten years.
Some community solar farms lease land to developers for quicker returns, despite lower ROIs due to leasing fees.
The ROI timeline also depends on the construction duration, which can range from months to years, depending on any legal obstacles.
How Long Does It Take To Build A Solar Farm?
The development of a 2-5 MW solar farm typically takes 8-14 months, subject to the interconnection process of the utility company and local permitting and approval processes.
The construction phase can add another 5-10 months, depending on seasonal considerations.
What Factors Affect the ROI of Solar Farms?
Initial Investment Costs
Costs of land acquisition or leasing, equipment procurement such as solar panels, inverters, mounting structures, installation labor, and permitting fees.
Energy Sale Price
Rates are determined by Power Purchase Agreements (PPAs), local utility pricing, feed-in tariff schemes, or energy market conditions.
Operational Expenses
Annual costs like maintenance, insurance, land lease payments (if applicable), and any taxes.
Government Incentives And Policy
Government incentives, such as tax credits, rebates, or grants, can significantly boost the ROI of solar farms.
They can either reduce the upfront investment costs or enhance the revenue through feed-in tariffs or premium electricity sale rates.
By promoting renewable energy adoption, these incentives make solar farm projects more economically attractive and viable.
Resale Value
Consider the value of the solar farm if you plan to sell it before the end of its operational life.
Panel Efficiency And Degradation
The efficiency of the solar panels in converting sunlight to electricity and their degradation rate over time, impact the energy output and the revenue.
Locations & Climatic Conditions
The location plays a pivotal role in solar farm ROI.
Areas with higher solar insolation (sunlight exposure) will naturally produce more electricity, leading to higher revenues.
Additionally, proximity to infrastructure, like substations or the main grid, can reduce transmission losses and costs, further boosting ROI.
What Are Some Advantages and Disadvantages of Having a Solar Farm?
Advantages
- You can rent out your land for a solar farm to earn between $250 and $3,000 per acre a year.
- Help in creating a sustainable and green future, by cutting down on carbon emissions and promoting the use of renewable energy.
- Production of electricity at a lower cost and without hurting the environment or nature. And the generated electricity can be sold to the grid for profit.
- Creating new employment opportunities and generating revenue for the economy.
Disadvantages
- Huge cost at the beginning, especially while setting up the panels and installing the system.
- Solar loans can have long repayment terms, often 10 to 20 years. If the solar farm does not generate enough revenue to cover the loan repayments, there is a risk of default. This could result in the loss of the solar farm and potentially other assets.
- Since the solar power system is heavily dependent on the weather and climate, it is obvious that it might not turn out to be a feasible option for everyone.
- Lastly, the large amount of vacant land required to install a solar farm is difficult to find owing to the increasing population.
How to Make the Most Out of Your Solar Farm?
If you are willing to make the most out of your solar farm, you simply need to ensure that the panels receive an adequate amount of sunlight throughout the year.
Moreover, you need to ensure that the panels and the entire solar energy system are cleaned regularly and the maintenance is ensured to a level that every problem is fixed as it arises.
For these, you must be able to track the performance of your system and also invest in good quality equipment.
What Are the Best Solar Companies in the World?
If you are looking for some of the best solar manufacturers or companies in the world, you may need to research according to the area or country you live in, to know the exact manufacturer you should get in touch with.
Nevertheless, the following are some of the most well-known and reputed solar companies in the world.
- First Solar
- Solair World
- Jinko Solar
- Enphase Energy
- SunPower
- Trina Solar
- SMA Solar Tech
- Yingli Solar
You must ensure that before you formalize a deal between you and one of these companies, you should get in touch with the manufacturer and clear all your doubts and questions.
Many people have no idea about how they can maximize solar energy when they start with a solar farm.
How Much Money Can a Solar Company Make?
Solar companies can make profits in many ways, including selling solar panels and equipment, providing installation services, PPAs, etc.
The profitability of a solar panel installation business hinges on the number of panels installed.
For businesses that lease solar panels, the typical annual return is around 6%, necessitating a long-term investment approach from the business owner.
If the business model is based on one-time installations where customers pay upfront, profits can range from $5,000 to $10,000 per project.
However, this model requires a continuous influx of new contracts. For larger industrial contracts that span over a year, the profit could reach into the hundreds of thousands.
Does the Type Of Solar Panels Used Affect ROI?
The efficiency of solar panels directly affects the amount of electricity generated.
High-efficiency panels might have a higher initial cost but can produce more energy, potentially leading to greater revenues and a better ROI.
Furthermore, the technology type, whether monocrystalline, polycrystalline, or thin film, can also influence costs, lifespan, and efficiency, thereby affecting ROI.
What Are The Land Requirements For A 1 MG Solar Farm?
A 1 Mega-watt solar farm typically needs around 7-10 acres of land for sufficient space for panels and maintenance.
However, due to the difficulty in finding such large tracts of flat land, purchases may extend to 20-30 acres.
The best location is a relatively flat or gently south-facing slope, but most large, cleared land plots are suitable.
How Much Does It Cost To Build A Solar Farm In South Africa?
The cost to build a solar farm in South Africa can vary significantly based on a multitude of factors such as the scale of the project, the type of solar technology employed, land costs, labor, and regulatory approvals, among others
A rough estimation, a 1MW solar farm in South Africa would cost around $500K, while a 100MW one would reach close to 5 million dollars.
