You can assume that a 1 MW solar farm would cost roughly $1 million to install. Meanwhile, that value sounds unusually low in comparison to typical costs associated with residential solar ($3 to $4 per watt). The “economies of scale” concept is in full effect in the solar industry. Also, you have to understand that solar farm costs include labor and material, plus taxes and other expenses such as permitting fees.
We all can agree that the solar industry has been experiencing rapid growth over the past decade, and a key contributing factor has been the rise and expansion of solar farms across the globe. A solar farm sometimes referred to as a photovoltaic power station, is typically a large decentralized solar array supplying electricity to the power grid.
The majority of these massive arrays are owned by utilities and are merely another asset for the utility to supply power to properties in their coverage area. Also, a broader definition of solar farms could include other ground-mounted solar arrays large enough to supply power to many households.
This general concept of a solar farm could be associated with both residential community solar and larger utility-scale solar. Note that the idea of community solar, which is now a key part of the solar farm business, has taken off in recent years as more homeowners have realized that they can go solar without putting solar panels on their physical roof.
These community solar projects—sometimes referred to as “solar garden” or roofless solar —is a solar power plant whose electricity is shared by more than one household. In most cases, a community solar array is a large ground-mounted installation that spans one or many acres. These solar gardens resemble utility-scale solar farms, but they are often smaller in size.
Customers can either purchase a share of a solar garden and own that portion of the overall array or they can lease energy from the solar system and, in a sense, replace their monthly utility payments with monthly community solar payments that are typically at a lower price.
Building a Solar Farm – Cost Breakdown and Profit Margin/ROI
Solar farms at the utility-scale will probably be at least 1 megawatt (MW), which is a power plant capable of supplying some 200 households. Although the cost range will depend on some factors like location and available sunlight hours, industry experts have stated that the cost per watt for solar installations at this scale is somewhere around $1/watt.
Therefore, you can assume that a 1 MW solar farm would cost roughly $1 million to install. Meanwhile, that value sounds unusually low in comparison to typical costs associated with residential solar ($3 to $4 per watt). The “economies of scale” concept is in full effect in the solar industry. Also, you have to understand that solar farm costs include labor and material, plus taxes and other expenses such as permitting fees.
The total cost of a commercial solar farm should be all-inclusive. The overall system cost consists of equipment, shipping, taxes, and rebates. Equipment costs vary depending on your specific needs. Shipping costs vary wildly depending on what you order and where it’s shipped to.
There can be both federal and state rebates. States and counties usually charge a fee to inspect and permit your new solar farm. This varies greatly between locations, but as a ballpark, they are usually less (sometimes much less) than $1000, but that can still affect your ROI on your solar investment.
In California, for instance, permitting fees are limited to $500 for systems smaller than 10kW (and increases only slightly after that). Some counties have special exemptions to this though, so double-check with relevant agencies first. Other states like Colorado have varying prices in the city but also average out around $500.
Also, note that fees paid to the property owner for the land can differ widely based on the unique characteristics of the land and the size of the solar installation. On average, the solar farm profit per acre is somewhere between $21,250 and $42,500 on an annual basis.
Agreeably, solar farming can be quite lucrative for some landowners, as most solar installations require, at minimum, 4 acres of useable land; however, some solar farms span hundreds of acres, netting property owners hundreds of thousands of dollars per year.
Reports have it that the quick expansion in the solar industry came as a result of two major factors: government programs like the Investment Tax Credit (ITC). It’s also very important to state that solar farms typically require less maintenance than other forms of energy generation, but they can still have a dramatic effect on the local surroundings.
For instance, service roads are typically built to grant vehicles access to different components of the solar installation, which might necessitate the clearing out of high-value crops and other natural vegetation such as trees and shrubs.
Also, during the land lease negotiation, it’s important to figure out who will be responsible for large financial liabilities, like real estate taxes, landowner insurance premiums, and other expenses associated with the property.
It’s critically important to discuss what happens to the solar installation once the lease has ended, as many property owners may want to return the land to its original condition, which can be an extremely costly endeavor if done without assistance.
You should also understand that as a normal part of their lifecycle, solar panels very slowly lose performance over time on the order of about 0.5% to 1% per year.
Note that a good manufacturer warranty will include this degradation explicitly in their terms, and a typical guarantee is for panels to still produce at least 80% of their initial output 25 years later. This means a 300-watt panel today would be guaranteed to still produce at least 240 watts 25 years from now.
In the past, certain solar components (namely inverters) would wear out quickly and need periodic replacement before the system could pay itself back. But in recent times, solar panels have gotten drastically more efficient, and modern systems should see a complete payback long before any replacements are necessary.
With an average payback time of 5-10 years and average warranties of 10-25 years, there should be little to no additional maintenance costs. In an off-grid solar setup, eventual battery bank replacement can be a significant expense.
In battery-backup situations, batteries will last about 10 years with proper care. In off-grid or grid-assisted setups, where batteries are cycled daily, the heavy usage can diminish that to 5 years or less. Batteries wear based on the number and depth of discharge cycles, so more usage will wear them out more quickly.
When considering building a solar farm, whether it be a 50 kW array or a 50 MW project and larger, there are a lot of factors to consider. A smaller solar farm may only require a few acres of land whereas a large utility-scale solar farm can require hundreds of acres.
You’ll need to consider the location of the land and whether or not it’s situated close enough to power lines and electrical panels to feasibly connect your array to the power grid or a centralized power source. You will also have to consider whether or not the location has water sources or cleaning options. This will be important to maintain the efficiency of so many solar panels that are situated so close to the ground.
Also, to make sure you’ll be able to meet the expected energy demand with your solar farm, you’ll need to first start with the needed kilowatt-hours of energy and work backward to get the number of panels you’ll need for the array.
To calculate this figure, you’ll need to determine the solar panel production ratio for your area to understand how much energy a certain solar panel wattage will provide. You will also need to find a good price for your solar installations. For larger arrays, there will likely be significant discrepancies between quotes from various contractors, so it will be important to get a few bids from different companies.