How to Start a Solar Farm
The solar farm industry set new records for capacity in 2021. Solar farms were growing faster than other sources of energy, including wind farms and natural gas projects. In 2020, the solar industry was the number one type of new utility.
The cost of installing solar panels has been steadily decreasing, as technology catches up to the solar energy projects trend. Solar farms are emissions free, making solar energy a popular choice for renewable energy.
Are you thinking of starting your own solar farm? We’ve got the information you need.
What is a Solar Panel Farm?
There are two main types of solar farms:
Solar photovoltaic power stations – A number of solar panels are installed together to create a power plant.
CSP or Concentrated Solar Projects – Mirrors are used as solar modules to reflect the sun into a central collector to absorb energy.
Either way, the solar power is connected by power line into an electricity grid, or power grid, owned by a utility company.
From those basic descriptions, solar farms differ in scale and purpose. See below:
Types of Solar Farms Businesses
The technology is similar, but the scale of the solar power projects is different. Although there are CSPs in the US, the most common solar project uses solar panels to collect energy into a photovoltaic power station. The photovoltaic power structures then use power lines to connect
Utility Scale Solar Farms
Utility scale solar farms produce at least 1 megawatt of power. Utility scale solar farms are usually much larger, producing up to 2,000 megawatts. To date, there are more than 10,000 utility scale solar electricity farms in the US.
To give you an idea of how much power a utility scale solar farm can produce, 1 megawatt can power 200 households.
Community Solar Farms
A community scale solar farm produces from 100 kilowatts(kW) to 5 megawatts (MW). A community solar farm is a large-scale solar project. The community solar panels create solar energy generation which is sold to power plants. The subscribers for that power company then get their energy bill adjusted, based on power output that the community solar panels produce, getting a percentage of their electricity bill reduced.
How Much Does It Cost to Start a Solar Farm?
On average, costs to build ground mounted solar arrays ranges from .82 to 1.36 per watt. That means that to build the infrastructure for solar facilities of 1 MW costs from $820,000 to $1.36 million.
That estimate includes the construction costs of solar installations, as well as other costs:
Negotiating permission to interconnect to a larger electricity grid using high voltage power lines – $30,000.
Solar company insurance – $23,000.
What about small scale solar facilities, such as rooftop solar gardens? Rooftop installations cost more to install, about $2.84 per watt. The energy generated will typically be less than 20 kW. Although the power produced is less, rooftop installations are popular for solar developers who don’t have the land needed for large scale solar development.
Are Renewable Energy Solar Farms Profitable?
Yes. A solar farm makes money through its Power Purchase Agreements. With the PPA, the solar farms that supply power wholesale were earning $24 per MW.
Through 2022, solar farmers could get an investment tax credit of 26% against their cost to develop solar technologies. It’s not certain that the investment tax credit will continue in future years, but with the need for clean ways to supply energy, it’s likely.
18 Important Steps to Start a Solar Farm Business
Solar panels stretch out for sizable distances. A solar farm requires a lot of room, but keep in mind that ground arrays are cheaper to install than rooftop solar parks.
The majority of zoning ordinances allow solar systems to be constructed on industrial or agricultural land. Otherwise, to develop a solar program you may have to appeal to planning and zoning municipal boards to allow your project by “special exception.” A special exception requires a public meeting.
1. Look at Your Competition
You can look at the websites for electric companies and see how much energy by percentage that they purchase from alternative sources. If they’re already purchasing energy from a solar farm, your research won’t be in vain – you’ll learn who the major players are in various areas.
To be a successful solar farm, you’ll need to be able to negotiate with utility companies. When you expand your research into other solar projects, you may learn the names or names of companies who have been successful in completing this very necessary step. Tron Solar in Illinois is a great example.
2. Get Professional Certification
As an investor, you don’t need professional certification. But hiring a solar energy business consultant is a must.
To learn more about key positions necessary for a successful solar panel farm, check with the Solar Energy Industries Association.
3. Know Your Target Market
Markets include both rural and urban residential electric companies. Some solar projects are specifically for educational institutions or specific large industries.
4. Choose a Business Name
Choose several business names. That way, before you settle on a name, you can check to make sure the web domain for that name is available, and that a business by the same name hasn’t already been registered in your state.
5. Create a Business Plan
Here are key elements of your business plan:
Company Information: Management
Executive Summary – How the company will be organized and managed.
Customers – Residential, business or educational.
Plans for management from construction to operations
Long-range operating plans, including maintenance, financials and expansion.
6. Brand Your Business
Set up your website and launch your social media presence.
7. Form a Legal Entity and Register
You have a couple options and should enlist the advice of a tax specialist. You can operate the business as a limited liability company, a partnership or a corporation (s-corp or c-corp).
8. Open a Business Bank Account
You’ll need a separate bank account for your business and also a separate business credit card.
9. Find a Location
As we stated, most solar energy projects need plenty of acreage. And of course, that acreage must be suitable for solar business, such as agricultural or industrial. As a minimum, you’ll need at least 20 acres.
10. Make Sure Your Land is Suitable
What if you’ve found a large tract of suitable land, but it’s heavily wooded? Can you remove most or all of the trees, or are there restrictions on timber activities?
Is the land flat or rolling? For what percentage of daylight hours does the area receive sunlight?
11. Purchase Insurance
As with most businesses, you’ll need general liability insurance.
You may also opt for “all risk” coverage as your project is developing. For example, the components of the system will be insured during transport to your site, during installation, during testing and into operations.
Other insurance policies needed will cover you for equipment breakdown and business interruption.
12. Purchase Necessary Equipment
Racking (to hold panels, often timed to shift with the sun)
Performance monitoring (to send an alert if there’s a malfunction in the system)
Grid connection equipment
Battery storage equipment
Property Security System
Grounds maintenance (to keep vegetation from growing within the solar equipment)
13. Hire Employees
You’ll need an EIN (employer identification number) to correctly file taxes once you hire employees. You’ll need: installation engineers, manager, solar consultants, maintenance professionals and customer service representatives.
14. Get Your Taxes in Order
You’ll also use your EIN when paying annual business income taxes to the IRS. You’ll pay payroll taxes.
You’ll pay property tax on your acreage.
Here’s where things can get dicey with tax assessment. If your panels and equipment can be easily removed (including being changed out for service or replacement), the asset may be viewed as personal property. If a tax assessing board views the panels and equipment as permanent, the asset will be taxed as real property (a much higher rate).
15. Apply for Licenses and Permits
Once you’ve gotten approval to build and operate, your biggest permit needed will be Interconnection to the power grid. This is a job for your solar consultant, and/or an attorney skilled in the permitting and negotiating process.
16. Build Your Solar Farm
Start cementing your brand by scheduling a ground-breaking solar installation event and hosting local media.
In addition to the equipment for your solar power plant, you’ll need fencing. With solar panels installed, you’ll need property maintenance and surveillance.
17. Market Your Business
Here are key elements of your marketing plan: sales strategy, ongoing market analysis, long-range planning, and industry engagement (attend local and national solar power conventions).
Join your local Chamber of Commerce.
18. Expand Your Solar Farm Business
A savvy solar developer uses annual profits to buy more land. Without land, you can’t expand.