The declining cost of photovoltaic solar installations has made installing a solar electric system enticing for many farmers, but there is more to consider than just the time it will take until the system will begin to turn a profit before installing a solar system, according to Ohio State University Extension Energy Educator Eric Romich.
Often, Romich said, payback estimates are given assuming things like every unit of energy a solar installation is able to produce is worth the same amount, a steady amount of electric-rate escalation for 10 years and that grant funding will be acquired for the installation.
“Installers tend to lean on a simple pay-back calculation,” Romich said Dec. 3 during a Solar Electric Investment Analysis webinar discussing estimating system production and assessing system costs. “It’s important to note that that financial metric is really not the best measure of success in these projects. What we really need to be doing is asking less about ‘what’s the simple pay-back?’ and more about ‘what’s the number we have to put on the check? What’s the initial investment that we’are looking at here?’”
Romich said costs are coming down for solar-system installations thanks to a reduction in solar panel pricing. Romich said nearly 60% of any project’s cost goes to things like installation, labor, sales tax or developer overhead and net profit.
“There’s a significant portion of the installation that has nothing to do with the actual equipment you are purchasing,” he said.
University of Nebraska-Lincoln Extension Energy Educator F. John Hay said farmers need to look into cost and system design factors before deciding whether a solar project is a good investment for their farm.
“When we think about production from solar, one thing we can equate it to in our brains is ‘What is the price of corn, and how much are we going to grow this year?’” he said. “When we think about the economics of that corn crop, we’re not only interested in how much we can grow but the price that we can get.
“For solar, our yield is a little more stable on an annual basis. That price varies quite a bit from utility to utility and state to state.”
Hay said real-world conditions for producing electricity are never what they are in the lab. Site-specific factors such as shading, orientation, tilt, temperature, and panel degradation can influence the amount of electricity produced by a solar system.
“Production is what we want,” he said. “We need those kilowatt hours because that’s how we’re going to make money.”
Romich said farmers should be sure to check on any possible renewable-energy tax exemptions that could prove beneficial.
Twenty-five states offer a sales-tax exemption program for solar and 36 states have a property-tax exemption program. Romich recommended farmers check the www.dsireusa.org website operated by North Carolina State University with U.S. Department of Energy funding for state-specific solar incentives and policy.
“Policy is complex and it’s often fluid,” he said. “Even the best modeling job we can do, there is still a certain element of risk that lies within the ability of policy to change over time.”