Do you want to know how much money 1 MW solar farms make yearly? If YES, here are 7 factors that determine the income & profit margin for a 1 MW solar farm. Whenever any entrepreneur wants to start a new business, one of the first questions that they usually ask is how profitable the business is or how much they are likely to make on the average daily, weekly or yearly from the business.
This narrative also applies to entrepreneurs who are looking towards starting a solar farm business. They would want to know how much they are likely going to make monthly and annually from their farm. Megawatts are used to measure the output of a power plant or the amount of electricity required by an entire city. One megawatt (MW) = 1,000 kilowatts = 1,000,000 watts. Gigawatts measure the capacity of large power plants or of many plants.
You are expected to have an idea of the number of solar panels needed to generate 1 MW and 1 MW is equal to one million watts. If you divide this one million watts by 200 watts per panel, we are left with needing 5,000 solar panels to produce one MW of power.
The truth is that there is no one-mold-fits-all when it comes to how much a 1 MW solar farm is expected to make. There are some factors that we are going to look into before giving an estimate of how much an average 1 MW solar farm make yearly and these factors are;
7 Factors That Determine How Much Money a 1 MW Solar Farm Can Make Yearly?
Table of Content
- 1. The Amount of Electricity Generated By the Farm
- 2. The Location of the Solar Farm
- 3. Alternate Power Sources in the Area (Competition)
- 4. The Management Style of the Solar Farm
- 5. The Business Model of the Solar Farm
- 6. The Advertising and Marketing Strategies Adopted by the Solar Farm
- 7. The Number of Years the Business is in Existence
1. The Amount of Electricity Generated By the Farm
One cannot conveniently state the amount a 1 MW solar farm is expected to make yearly if you do not know the amount of electricity the solar farm is expected to generate. A 1MW system can generate between 1,300,000 -1,600,000kWh per annum. This equates to around 3,500-4300kWh/day on average.
2. The Location of the Solar Farm
When it comes to setting up a solar farm, location plays a major role which is why feasibility studies and market survey are essential before settling for a location. Usually, if your solar farm is located in an area that is known to be sunny year in year out, you are sure of generating enough solar energy and, you may not have to struggle to make good money from the business. But if you locate the solar farm in a location that hardly sees sunlight, then you will sure make lower money from your 1 MW solar farm.
3. Alternate Power Sources in the Area (Competition)
Another important factor that will determine how much a 1 MW solar farm is expected to make yearly is the type of alternate power sources available in the location. Aside from solar energy which is power generated from the sun, we have Geothermal energy from heat inside the earth, Wind energy, Biomass from plants and Hydropower from flowing water. If residents of the area where you have your solar farm have a cheaper source of power, they would want to price down your power supply.
4. The Management Style of the Solar Farm
Another key factor that will determine the amount a 1 MW solar farm is expected to make yearly is the management style of the farm. Trust me, the results you will get when you have a good manager will be far greater than what an average or bad manager will get. Even if you give the managers same conditions to work and same customers base to market and service.
5. The Business Model of the Solar Farm
There are different business models that a solar farm can adopt and these business models offer different results. For example, the amount a solar farm that also runs franchise makes yearly will be different from the amount a strictly one location solar farm will make from 1 MW solar farm. This goes to show that the amount a solar farm will make from 1 MW solar farm is dependent on the business model of the solar farm.
6. The Advertising and Marketing Strategies Adopted by the Solar Farm
Another key factor that will determine the amount a 1 MW solar farm can make yearly is the advertising and marketing strategies adopted by the farm. Trust me, there are several advertising and marketing strategies that can help a business increase their earnings, but you may be expected to spend more.
But the results you will make will far outweigh the amount you spent on advertising and marketing. Of course, you don’t expect a solar farm that is engaging in aggressive advertising and marketing to make same amount yearly with one that is passive with its advertising and marketing.
7. The Number of Years the Business is in Existence
In business, the number of years you are in existence will go a long way to determine the amount you will make especially if the business is properly managed. This is because you would have over the years won loyal customers.
For example, in your first fiscal year (FY1) you might make one hundred and twenty thousand dollars ($120,000), in your second fiscal year (FY2) you might make one hundred and thirty thousand dollars ($130,000) and in your third fiscal year (FY3) you might make one hundred and fifty thousand dollars ($150,000). Interestingly, most businesses including solar farm usually breakeven from the third year of operations.
In conclusion, the amount a 1 MW solar farm will make yearly is dependent on all of the factors listed above. But according to Landmark Dividend, the average solar farm profit per acre is somewhere between $21,250 and $42,500.
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