Are Solar Farms Worth It? Costs and Benefits
|Topic: solar projects
|Read Time: 11 mins
| Landowner type:
Independent landowners | Institutional landowners
Are you a landowner? If so, you might be asking yourself the question, “Are solar farms worth it?” Join us as we discuss everything you need to know about hosting a solar project on your land.
We often get approached by landowners who ask us one simple question: “Are solar farms worth it?” Now, this answer won’t be the same for every landowner because you’ll need to make sure that your land is suitable for hosting a project.
But if you’re seriously considering diversifying your income with a renewable energy project? Well, you’ll want to weigh up the pros and cons of solar carefully. And that’s where we come in.
In this deep dive, we’ll cover everything you need to know that should help you answer the question: “Are solar farms worth it?” From the financial and environmental benefits of solar farms to the drawbacks that come with losing arable land, we’ve got it all. Now, let’s dive in.
The Benefits of Solar Power for Landowners
They’re environmentally friendly
Solar farms typically comprise large collections of photovoltaic panels that span over 100 acres of land in total. Now, they might take up a fair deal of space. However, solar energy does not produce notable air pollution or greenhouse gases during production.
It’s worth mentioning that solar farms release very low levels of sulphur dioxide and nitrogen oxide. However, the figures are virtually nil. It should also be noted that solar energy offers a positive knock-on effect on the environment as fewer fossil fuels are being burned. To make solar even more appealing, the source of energy used for these projects is abundant. So, as long as solar radiation from the sun arrives on earth, we’ll have solar energy in spades.
While solar energy isn’t exactly cheap (the UK’s energy is linked directly to the price of gas), it’s a far cleaner alternative.
They don’t require much maintenance
The beauty of solar panels is that they require minimal maintenance once they’re up and running. Developers of large solar projects will need to arrange periodic cleanings to keep panels free of obstacles that can affect radiation absorption. These cleanings and checks only need to take place around 3 or 4 times a year (which is minimally intrusive for landowners). Cost-wise, the maintenance procedures should only be around 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 at hand. 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.
We’re not saying that the upfront cost of a solar farm isn’t enormous (we’ll get to this in just a moment). However, some units can go up to 20 years without major maintenance, which significantly reduces the cost of running a project. Plus, they’re highly unlikely to be affected by any petroleum gas shortages and are virtually future-proof as a result.
There are major economic advantages that come with 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% and 20%, these projects usually pay for themselves within 5 to 10 years. This might seem like a long time to wait for a profitable project, but ROI is more of a developer’s concern than a landowner’s, as most commercial-scale solar projects are built and financed by a developer; landowners typically opt for payment arrangements that offer 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 more profitable than any crops grown on the same land. With average rent prices per acre clocking in at around £850 to £1100 in 2023, 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. Although we’re slowly moving away from a reliance on gas, 33% of the country’s energy still comes from gas.
Now, it’s great to see that renewable energy is making up an increasing percentage of the country’s energy usage (approximately 40% in 2022). But as wind accounts for 26.8% of the country’s overall energy mix and solar accounts for just 2.6%, we still have a way to go. So, why not take steps towards increasing the percentage of solar with a project on your land?
Very little financial viability lies with the landowner
We completely understand that landowners 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 quotes for an acre of rented land for solar projects is typically around the £1,000 mark on average 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). So, rents should keep up with inflation across the entire lease term.
If you opt for a slightly more precarious and variable payment arrangement like turnover rent, you can pull in even more impressive percentages. However, ALL rent types can be index-linked (and this isn’t strictly reserved for fixed arrangements).
It’s just incredibly important to remember that the index-linked rents will need to be mentioned in your lease in clear terms. This way, your site operator won’t be able to skirt around the issue.
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 a year for a fixed, per-acre contract. A percentage based on 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. We’ll also mention that understanding the value of your site (and reviewing it carefully with a SiteScan™) can help you negotiate far higher rates than £1000 per acre.
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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 we’ll be completely honest here – it’s expensive.
The average solar farm costs around £375,000 per megawatt-hour (MWh) of electricity produced. Just so you’re aware, this takes panel and inverter costs into account. Smaller community farms usually cost around £500,000 to set up (which is typically manageable with bank finance and capital injections from investors). However, you’ll want to bear in mind that larger projects can cost around £7.5 million to get started if we’re looking at a 20 MW capacity on 100 acres of land. So, the upfront investment for a solar farm can be huge.
We’ll mention that wind turbines aren’t necessarily a cheaper option for landowner-developers (depending on the scale of the wind farm you’re building). The average commercial wind turbine costs approximately £3.13 MILLION and can cost significantly more to maintain than solar panels. So, it’s important to weigh up the overall costs across the lifetime of a project before deciding on the right energy source for your land.
Before you get too worried about the costs of building a solar farm, let us fill you in on a little something. Newer photovoltaic cells are far cheaper and more capable of producing far greater capacity than they could 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 incredible improvement in technology leads to better and more efficient energy production. And with this comes a better return on investment (and less time required to see a return on investment).
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 6 to 8 acres of land for a 1MW farm. So, for every 5 MW installation, you should expect to set aside around 30 acres of land. 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, some landowners will simply be edged out based on the amount of land they have available. Oh, and don’t forget the space you’ll need to accommodate inverters, storage batteries, and access roads for maintenance crews.
Energy storage requirements can be huge
Speaking of space, many large-scale solar farms are using 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, ensuring 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. So, it 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 unpleasant to look at. Many even believe that these ‘unattractive’ and ‘ugly’ panels could reduce the value of properties they’re placed on (and, by extension, the value of the entire area). This view is especially common among the older generation, with the age bracket of 57-72 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% 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% 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, it’s not always reliable.
We’re 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 probably may not be the best option for your land.
Before we round off this section, let’s discuss locations in the UK that are better suited to solar than others. The South West of the country are the most favourable spots for solar panels, including Plymouth, Dorchester, Southampton, and Colchester. These southern spots get far more sun than the northern parts of the country, making them top picks for solar developers.
So, Are Solar Farms Worth It?
We’ve carefully covered the advantages and disadvantages of harnessing wind energy that you should be able to weigh up. But we’d like to finish this deep dive by saying exactly why solar farms are worth it for the average landowner. We understand that the impact on your arable land might be a concern. However, the benefit of reliable and passive income can’t be understated here.
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 we call a win-win.
Things will take a complicated turn if you’re planning to self-develop. But working with a developer takes the financial onus and building stresses completely off landowners. For that reason, we recommend doing your research, weighing up capital, and assessing your appetite for risk before diving in. Regardless of what you choose to do with your land, be brave enough to take that first step. So, don’t be afraid to be bold and get started on your journey towards diversification.
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%, while high-end commercial panels can be over 22% efficient.
What’s the average ROI for a solar farm?
As we mentioned earlier, the average ROI for a solar farm is between 10% and 20%. 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 and downtime.
How much energy does the average solar panel produce?
How long do solar projects last?
Before they need to be decommissioned or repowered, solar projects usually last between 25 and 30 years.
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. These issues should be outlined by a developer in an Environmental Impact Study before the project is approved.
There you have it: The Ultimate Guide that should 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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