Are Solar Farms Worth It? Costs and Benefits

Are you a landowner? If so, you might be asking yourself the question: “Are solar farms worth it?”. This article covers the things you need to know about hosting a solar project on your land.

I often get approached by landowners who ask one simple question: “Is it worth investing in a solar farm?”.

The answer isn’t the same for everyone, as the suitability of your land plays a significant role in determining whether hosting a project is the right choice.

If you’re seriously considering diversifying your income with a renewable energy project, it’s important to carefully weigh up the pros and cons of solar.

In this deep dive, I’ll cover what you need to know to help you answer the question: “Are solar farms worth it?”. From the financial and environmental benefits of solar farms to the potential drawbacks, like the loss of arable land, I’ll cover all the key points.

The Benefits of Solar Power for Landowners

They’re environmentally friendly

Solar farms typically comprise large collections of photovoltaic panels that can span over 100 acres of land. While they require a fair amount of space, the environmental impact of solar energy is minimal compared to traditional energy sources:

• Low Emissions: Solar energy production generates negligible air pollution or greenhouse gases. Though small amounts of sulphur dioxide and nitrogen oxide are released, the levels are virtually zero.

• Reducing Fossil Fuel Use: By producing clean energy, solar farms help reduce the burning of fossil fuels, offering a positive knock-on effect on the environment.

• Abundant Energy Source: The energy used for solar projects is limitless – as long as the sun shines, we’ll have a renewable source to harness.

While solar energy isn’t always cheap (with UK energy prices still tied to the cost of gas), it’s a far cleaner and more sustainable alternative.

They don’t require much maintenance

The beauty of solar panels is that they require minimal maintenance once they’re up and running.

For large solar projects, developers will usually arrange periodic cleanings to keep panels free of debris that can affect radiation absorption. These cleanings and checks only need to take place around three or four times a year (which is minimally intrusive for landowners).

Cost-wise, the maintenance procedures should only cost around £12 per kilowatt of installed capacity.

It’s important to note that the cost and effort to maintain a solar farm will depend on the overall size and scale of the project. But one thing’s for certain – wind turbines are typically far more expensive to maintain and operate over the lifetime of a project than solar panels.

I’m not saying that the upfront cost of a solar farm isn’t large. However, some units can go up to 20 years without major maintenance, which significantly reduces the cost of running a project.

Plus, solar farms are highly unlikely to be affected by any petroleum gas shortages and are virtually future-proof as a result.

There are major economic advantages to leasing land for a solar project

It probably goes without saying, but many landowners are looking to diversify their income streams with renewable energy projects.

And, as the average return on investment (ROI) for a solar farm is between 10 per cent and 20 per cent, these projects usually pay for themselves within five to 10 years.

While this might seem like a long time to wait for a return on investment, it’s more of a concern for developers than landowners.

Most commercial-scale solar projects are built and financed by a developer. Landowners typically opt for payment arrangements that provide a fixed income across the project’s lifetime.

Even if you decide to choose a more complex payment arrangement that’s calculated based on the project’s output, a base rental payment should still apply.

To sweeten the deal, most projects pay a rental rate that’s more profitable than growing crops on the same land.

With average rent prices per acre still clocking in at around £850 to £1,100, it’s certainly an appealing venture for most landowners.

Plus, leasing your land for a solar project gives you peace of mind if you experience poor yields during the year.

They diversify the country’s energy supply

With the UK aiming to reach net-zero emissions by 2050, diversifying the country’s energy sources is crucial.

After all, relying on gas that emits greenhouse gases like carbon dioxide, methane and nitrous oxide is the opposite of what the country is going for.

While progress is being made, 33 per cent of the country’s energy still comes from gas.

On the bright side, renewable energy now makes up about 40 per cent of the country’s energy use.

However, as wind accounts for 26.8 per cent of the country’s overall energy mix and solar accounts for just 2.6 per cent, we still have a way to go.

By hosting a solar project on your land, you could contribute to increasing the share of solar energy and help the UK make further strides toward its sustainability goals.

Very little financial viability lies with the landowner

As a landowner, you might be concerned about the immense cost of setting up a solar project.

But luckily for you, landowners usually aren’t liable for the success of projects hosted on their land (unless you decide to self-develop a project and finance it yourself, that is).

If you’re not going it alone, everything from planning permission and grid connection to maintenance and decommissioning lies with a developer.

And as new projects can take years to set into motion (with Grid connection being a major roadblock), offloading the financial risk can be a huge benefit.

The industry average for an acre of rented land for solar projects is typically around the £1,000 mark for a fixed payment arrangement.

With modern leases lasting between 25 and 40 years (and these days, it’s sometimes even longer), landowners will receive an income for the lifetime of the project.

It’s also worth mentioning that rents are typically index-linked (especially if you bake these terms into your lease). This means payments are adjusted in line with an agreed inflation index, such as the Consumer Prices Index (CPI), to ensure that their value keeps pace with rising costs over time. So, rents should keep up with inflation across the entire lease term.

You can pull in even more impressive percentages if you opt for a slightly more precarious and variable payment arrangement like turnover rent. However, an operator needs to index-link ALL rent types they offer.

Remember, index-linked rents must be clearly mentioned in your lease. This way, your site operator won’t be able to skirt around the issue.

What is turnover rent?

Turnover rent is a variable payment arrangement where the rent you receive is tied to the revenue generated by the solar project on your land.

How It Works: Instead of a fixed annual amount, you receive a percentage of the income earned from the energy produced and sold.

Turnover rent suits proactive landowners willing to monitor payments and embrace some financial risk.

What do I need to consider if I choose a different payment arrangement?

A very large solar farm in the UK would sit around the 100-acre mark. For a project of this size, a rough and simple calculation would return around £100,000 per year for a fixed, per-acre contract.

A percentage-based contract could earn you more, as this often relies on the turnover or productivity of the site itself. However, there are many variables to this calculation that will depend on the terms of a lease agreement.

It’s also important to mention that understanding the value of your site (and reviewing it carefully with SiteScan™) can help you negotiate improved payment terms.

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The Disadvantages of Solar Power for Landowners

The upfront cost can be immense

If you’re taking on a solar farm project as a landowner-developer, you’ll need to shoulder the entire cost of setting things up. And I’ll be completely honest here – it’s expensive and one of the main disadvantages of solar.

The average solar farm costs around £375,000 per megawatt-hour (MWh) of electricity produced, including panel and inverter costs.

Smaller community farms usually cost around £500,000 to set up (which is typically manageable with bank finance and capital injections from investors).

However, larger projects (such as a 20 MW capacity on 100 acres of land) can cost around £7.5 million to start. So, the upfront investment for a solar farm can be huge.

But don’t let the upfront costs discourage you. Newer photovoltaic cells are far cheaper and more efficient than they were only 10 years ago.

According to the International Renewable Energy Agency, this is largely down to ‘improved technology, economies of scale, supply chain competitiveness, and the growing experience of developers’.

This means better efficiency and a quicker return on investment – making solar a more viable option than ever before.

Solar panels require a lot of space

It’s no secret that solar farms require a lot of space to be viable on a commercial scale.

Based on Green Tech Media’s Research, you’ll need at least six to eight acres of land for a 1 MW farm. So, for every 5 MW installation, you should expect to set aside around 30 acres of land.

Oh, and don’t forget the space you’ll need to accommodate inverters, storage batteries and access roads for maintenance crews.

Depending on the size of your property, this can be a considerable undertaking and it may affect your day-to-day operations.

On top of this, many developers shoot for at least 120 acres to make their project economically viable. In some cases, developers will scout out properties that can offer at least 200 acres to be on the safe side.

As a result, the process will simply edge some landowners out based on the amount of land they have available.

Energy storage requirements can be huge

Speaking of space, many large-scale solar farms use battery storage to store excess energy produced by the project.

Batteries are by far the most popular storage method for solar projects. This is because they help to smooth out variations in energy flow throughout the year. This ensures that your project can supply energy to the Grid during periods of lower output.

The only thing you’ll need to consider here is that these batteries will require extra space. So, weigh that up before speaking to a developer about hosting a project on your land.

Some people see panels as eyesores

While this isn’t the case for everyone in the UK, many communities see solar farms as eyesores.

This can have a serious impact when landowners are trying to answer the question: “Are solar farms worth it?”.

As with wind power, some people see acres upon acres of solar panelling as unpleasant to look at.

Many even believe that these ‘unattractive’ and ‘ugly’ panels could reduce the value of properties that you place them on (and by extension, the value of the entire area). This view is especially common among the older generation, with the age bracket of 57 to 72 seeing them as the most unattractive.

Despite these concerns, a government study recently found that the public largely supported ground-mounted solar panel facilities. This included areas that were incredibly close to residential properties.

An impressive 81 per cent of respondents to a survey by the Department for Business Energy and Industrial Strategy (BEIS) stated that they’d support solar farms near them. In contrast, just 3 per cent were ‘significantly opposed’ to the idea.

Output can vary significantly throughout the year

The final thing to consider when you’re trying to answer the question: “Are solar farms worth it?” is overall output.

Although long daylight hours and summer sunshine can produce great yields for part of the year, this is not always reliable.

I’m not saying that the sun won’t always be there. But cloud cover can seriously disrupt the amount of energy that your solar project can produce.

This won’t necessarily be an issue if you’re dealing with a fixed payment arrangement that guarantees a solid rental income. But, if you’re relying on excellent output for income, a solar farm may not be the best option for your land.

Before I move on, let’s discuss locations in the UK that might be better suited to solar than others.

The South West of the country is the most favourable spot for solar panels, including Plymouth, Dorchester, Southampton and Colchester. These southern spots get far more sun than northern parts of the country, making them top picks for solar developers.

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Are Solar Farms Worth It Compared to Other Renewable Options?

When considering whether to pursue a solar project on your land, it’s essential to compare solar farms with other renewable options.

Wind turbines

• Costs: Commercial wind turbines in the UK typically cost between £1.3 million and £2 million per megawatt (MW) installed. This fee excludes land acquisition. Offshore turbines are more expensive, with costs reaching up to £5 million per MW installed.

• Maintenance: Wind turbines generally require more maintenance than solar panels, which can increase operational costs over time.

• Land Requirements: Wind turbines often need larger areas and are usually suited to larger properties. Some areas may not permit turbines in residential zones, necessitating appropriate planning permissions.

Biomass energy

• Costs: Small-scale biomass heating systems can cost between £10,000 and £50,000, while larger power plants range from £2 million to £15 million or more. Establishing a reliable supply chain for biomass feedstock, such as wood chips or agricultural residues, is crucial and can add to these initial costs.

• Land Use: Biomass energy production requires a consistent supply of organic materials. This may necessitate dedicated land use for growing energy crops or sourcing feedstock.

Solar farms

• Costs: The average cost of a solar farm is approximately £375,000 per megawatt-hour (MWh) of electricity produced. This figure includes panel and inverter costs. Smaller community farms typically cost around £500,000 to set up, which can be manageable with bank financing and investor capital. Larger projects, such as a 20 MW farm on 100 acres, can cost up to £7.5 million.

• Maintenance: Solar panels generally require minimal maintenance, with periodic cleanings and checks needed around three or four times a year. This results in lower operational costs compared to wind turbines.

• Land Use: Developers can install solar farms on land that’s less suitable for agriculture. This allows landowners to generate income without compromising prime arable land.

Ultimately, the choice between solar, wind and biomass energy depends on your specific circumstances. These can include land suitability, financial considerations and long-term goals.

Consulting with renewable energy experts can provide tailored advice to help you make the best decision for your property.

So, Why Are Solar Farms Worth It?

I’ve carefully examined the advantages and disadvantages of harnessing wind energy, allowing you to weigh up your options.

I’d like to finish this deep dive by explaining exactly why solar farms are worth it for the average landowner.

I understand that the impact on your arable land might be a concern. But I can’t understate the benefits of reliable and passive income.

Developers will typically pay an extremely generous rate to lease land for a solar farm. So, if you choose to host a project on your land, you’ll receive an income while contributing to net-zero efforts.

Now that’s what I call a win-win.

Things will take a complicated turn if you’re planning to self-develop. However, working with a developer takes the financial burden and building stresses completely off landowners. For that reason, I recommend doing your research, weighing up capital and assessing your appetite for risk. This will help you decide which option is right for you.

Regardless of what you choose to do with your land, be brave enough to take that first step.

Don’t be afraid to be bold and get started on your journey towards diversification.

FAQs

How efficient is solar power?

Solar panels can be tricky as the conditions for harnessing solar energy are never going to be perfect. Most residential panels have an efficiency of around 20 per cent. High-end commercial panels can be over 22 per cent efficient.

What’s the average ROI for a solar farm?

As I mentioned earlier, the average ROI for a solar farm is between 10 per cent and 20 per cent.

It’s worth noting that the return on investment for solar farms can vary wildly depending on:

• Weather conditions
• The part of the country they are located in
• Downtime

How much energy does the average solar panel produce?

The average solar panel has an output rating that falls between 250 and 400 watts. A large solar panel that’s around 400 square feet will produce between 350 and 850 kilowatts of energy per month.

How long do solar projects last?

Solar projects usually last between 25 and 30 years before developers decommission or repower them.

Do I need planning permission for a solar farm in the UK?

Installing a large number of solar panels for a solar farm in the UK will always require planning permission. Depending on the size of the project, you’ll need approval from the Local Planning Authority. Oh, and the Secretary of State for the Department for Energy Security and Net Zero (DESNZ) too.

Can solar farms harm local wildlife?

As with any renewable energy project, solar farms can negatively impact local wildlife as they’re simply so big.

The biggest impacts on wildlife include clearing land, stormwater runoff and floating systems that affect water quality.

You should have these issues outlined by a developer in an Environmental Impact Study before a local authority approves the project.

There You Have It: The Ultimate Guide To Help You Answer the Question: “Are Solar Farms Worth It”?

If you’re still unsure about placing a solar project on your land, reach out to our expert solar power consultants. We’ll carefully lead you through your options and demystify the process of leasing your land for a renewable energy project.

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