Kofi Britwum, Assistant Professor of Farm Management, britwum@udel.edu
Even though interests in renewable energy gained traction in the 1970s, sparked by the oil crises, recent concerns about the environment have encouraged investments and research in renewable energy as a viable alternative source. In years 2021 and 2022, the renewable energy portfolio exceeded nuclear energy in terms of total electricity generated. Together, wind and solar energy comprised 14% of total energy generated in 2022, up from 12% in 2021 (according to the US Energy Information Administration) with California, Texas, and North Carolina ranking as leaders in solar energy generation.
In Delaware, the Renewable Energy Portfolio Standards Act, which was signed into law in 2021 by Governor Carney and stipulates that 40% of the state’s energy be sourced from renewable energy by 2035 has amplified the significance for alternatives such as solar energy.
Within the farming community, there is widespread adoption of renewable energy, with solar power being the most commonly adopted by farmers. Several incentive programs exist, but they vary by states. In addition to environmental considerations, the adoption of solar energy by farmers presents great benefits as well as potential drawbacks. Some of these are discussed below.
Benefits/Cost Savings of Incorporating Solar Energy
Irrespective of the farm enterprise, incorporating off-grid solar energy can result in substantial cost savings on several fronts, including lighting, heating and cooling systems, crop drying, irrigation, electric fences, and more. To provide some context to these cost savings, consider this scenario:
Conservatively, a 1-kilowatt solar panel system can produce 750-to-850-kilowatt hour (kWh) per year. That is, if we use the typical high end of between 350 – 400 Watts of power produced by residential panels. With 7 hours of sunshine a day and given 350 Watts solar panels,
Kilowatt hours/day = (7hours x 350 Watts) / 1000 = 2.45kWh
In one year, this translates to 2.45kWh x 365 days = 894.25kWh/year
For the purposes of this example, let’s still assume an output of 850kWh/year. With a 10kW solar photovoltaic system, that comes up to 8,500kWh/year.
In Delaware, a conservative average cost per kilowatt of electricity is 15.60 cents per kWh. Thus, if 8,500kWh/year is generated from solar,
Cost savings = 8,500kWh/year x 15.60 cents per kWh = $1,326.00 (for a 10kW solar system)
Another benefit of solar photovoltaic panels is that they require minimal maintenance after installation, making them easy to manage. The average cost of a 10kW solar systems is $20/kW/year (see Michigan State University factsheet) or $200/year. With our example, this reduces cost savings marginally, to $1,126 a year for a 10kW system (i.e., $1,326 – ($20/kW/year x 10kW)).
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Drawbacks of incorporating solar energy in farming
Solar photovoltaic panels may entail significant upfront costs. In Delaware, average solar panel systems cost $2.65/W to install. For a farm wishing to install 10kW (1,000W) solar system,
Installation costs = $2.65/W x 10 x 1000 = $26,500
However, there is some good news. Costs of installation are trending down. According to the Energy Information Administration, the average construction costs for solar projects in the United States, spanning all types of solar panels, declined by 6% to $1,561 per kilowatt (kW) in 2021. There are also several incentive programs (some described below) that can help defray some of these costs.
Solar farms take up space, and in a small state such as Delaware it can compete with tillable agricultural land. The panels may be aesthetically displeasing for some, and there is also the possibility of irregular availability of sunlight – depending on whether or how long the sun is up.
Federal and State Incentives
Rural Energy for America Program (REAP)
REAP is a federal program administered by the United States Department of Agriculture (USDA) that provides guaranteed loans to agricultural producers seeking to integrate renewable energy systems into their operations. Eligibility requires farmers to derive at least 50% of their gross income from their farm operations. The loans can be applied towards the purchase and installation of small or large solar equipment and guarantees loans of up to 75% of eligible project costs. Grants of up to 50% of eligible costs are also available, from a minimum of $2,500 up to $1 million, although matching funds are required for farmers applying for a grant only.
Investment Tax Credit (ITC)
The solar investment tax credit (ITC) is a federal program that offers a 26% tax credit for solar panels installed in years 2020 and 2021, and a 30% tax credit for installations between 2022 to 2032 upon eligibility. Expenses covered by the ITC include the cost of the solar panels, installation or contractor costs, and applicable sales taxes. For eligibility, the solar project must be situated within the United States, the equipment should be either new or limited previously used equipment, and ownership of the solar project is required—it should not be leased to a tax-exempt entity or be under power purchase agreements. Although the tax credit does not function as a rebate (not issued as a check after filing taxes), it reduces an entity’s federal income tax liability. For instance, if $100,000 is invested in a solar system, $30,000 of that amount can be deducted from taxes owed.
Energize Delaware Program
State programs such as Energize Delaware Program extends support to agricultural producers by providing loans of up to $2million and up to $100,000 in rebates for agricultural producers towards solar or energy efficient installations, which can substantially lower costs associated with solar projects for farmers. To qualify for the Energize Delaware Farm Program, the entity must be categorized as a farm (per USDA definition), having generated a minimum of $1,000 in sales from agricultural produce within a year, and it should incur at least $10,000 in annual energy costs.
What to Consider
Evidently, consideration should be given to available land to install the necessary infrastructure on the farm. An estimated 5-10 acres of land are needed for each 1MW (1,000 kW) of solar generating capacity. It is crucial to evaluate both costs and benefits, and these considerations can be examined within the framework of the various federal and state incentives that are available to farmers.