March 03, 2017
Is Solar Right for Your AG Business?
Agriculture businesses throughout the United States are embracing solar energy for its economic and environmental benefits. Electricity costs are one of the largest operating expenses facing farms, ranches, and dairies, and the opportunity to reduce or eliminate these costs is attractive. Solar is especially popular in sun-rich states like California, Nevada, Arizona, and New Mexico, as the benefits vary with weather conditions and property values.
What to Consider
Is solar right for your agriculture business? Here are some questions to ask to help you determine whether it would be worthwhile to consider solar energy.
- How much electricity do you use? Solar energy proves cost-effective when electrical use is high. High electricity bills usually coincide with businesses that pump a lot of water for irrigation, cool large buildings for livestock or produce, and use a large amount of lighting during the night. These uses are all typical of large farms, ranches, and dairies.
- Electricity costs are high. If you live in an area of low electricity costs, solar energy may not make economic sense in the short run. It depends in large part on the rate of price increases by local utilities. On the other hand, in some areas of the country where electricity prices are high, producing solar energy is more profitable than growing traditional crops, according to a report by Renewable Energy World.
- Property values. In areas where agriculture property is very expensive–some areas of wine country, for example–it may not be cost effective to dedicate farmable land to solar energy. The potential for crop revenue per acre vs. solar revenue per acre for a particular property can make solar an even better investment.
- However, if your operations involve large buildings, rooftop solar may be able to offset some or all of your electricity costs.
- Your customers value green business practices. In many industries, end customers (consumers) have developed a preference for sustainably grown products and sustainable business operations. Businesses using solar energy to help produce crops or animal products can sometimes charge more for their products because of this positive brand association.
- Available space. Of course, for an agriculture business of any size, it will have to have enough available space where solar panels can be installed. In many cases, this means land that is less productive for farming or ranching. Land must also be inspected to ensure that it can support a large solar infrastructure. Proximity to the water table or the presence of corrosive materials in the soil can make solar installations more challenging or economically unfeasible.
Solar energy isn’t right for every agriculture business. Where it is right, the economic and environmental benefits can be powerful. The price of solar panels have dipped to all-time lows, and the federal Investment Credit Tax, which provides a 30 percent price reduction in most cases, has been extended through 2020. Some states have additional tax deductions to make solar energy even more attractive. In California, net metering allows solar power system owners to sell excess power back to the grid, receiving credit that can be applied to energy used at night or during weather patterns where the solar system is less productive. Finally, new financing options make solar energy easier to implement than ever.