Solar farms: costs, challenges and economic offsets for landowners

With technology becoming more advanced and conventional farming costs on the rise as a result of tariffs and war, many landowners and farmers are now turning to renewable energy as a source of additional income to help offset their outgoings. In this article we discuss the benefits and challenges which a landowners may need to consider before developing land for photovoltaic installations, more commonly known as solar farms.

Solar farms, being one of the more readily accessible form of renewable energy, offers clean electricity and can be installed on farmland which may be unused, underutilised or simply not the right conditions for other forms of farming practice. In addition to presenting new forms of revenue to landowners, we must not forget that renewable energy also positively impacts the environment by reducing carbon footprint and improving energy resilience, both key topics in an era where the Government is pushing for Net Zero. However, while it is clear solar farms can offer benefits to landowners and the environment, they are of course not without their drawbacks, drawbacks in the form of financial, operational and regulatory challenges, all which will need to be carefully considered before a landowner ventures down this path.

Costs

The upfront costs of establishing a solar farm can be substantial and not always viable for landowners working small holdings or farmers who are entry level within the industry. Small to medium sized solar farms could set a landowner back anywhere between half a million to one million pounds depending on the size of the site. Further consideration and costs may arise in relation to connection into the grid and quality of equipment, while larger operations could reach well into several million pounds.

Although hardware costs have decreased over time through innovation and technology advancements, landowners will still require significant capital to take on this form of project, regardless of size.

In this economy, not everyone has a spare couple million to hand to develop a solar farm on their property. As such, an alternative option which is often explored by landowners is to lease land to developer for solar development in return for a passive income. Albeit, this approach is often at the expense of additional legal fees, a long-term commitment, lower return and limited control over their property.

Operational challenges

It is important to note the work involved does not end once the solar farm begins operation and generating electricity. Ongoing maintenance will be required regardless of whether the renewable infrastructure is owned outright or leased to a developer. Solar farms require persistent cleaning and monitoring to ensure the equipment produces a good return on power.

Although the panels themselves require relatively low maintenance, components which keep the panels operational sometimes fail and may need replacing. As well as this, other factors may need to be considered such as vegetation management, security, insurance and health and safety requirements all which could result in added expenditure.

While the challenges do differ for landowners who lease their property to developers, they are not absolved outright from operation responsibility and may be required to avoid causing interference to the solar farm, maintain boundary features or simply grant access to the developer or its agents which could hinder other farming operations.

Economic offsets and long-term benefits

Alongside startup costs, the financial return is likely to be at the forefront of every landowners mind when entering into a solar lease or developing and operating your own solar farm.

While it is clear there are initial setup costs and operational challenges, solar farms can offer financial security over long periods via rent if leasing; or for owner operated sites, by selling electricity directly to the grid under schemes such as Smart Export Guarantee. Moreover, for owner operated sites, landowners could see a reduction to their electricity bills when paired with sites such as a battery storage.

It is important to note that there may also be tax benefits associated with renewable energy production which landowners might be able to take advantage of by offsetting their installation costs against taxable income.

Conclusion

While solar farms do present a new opportunity for landowners to diversify their income and improve on environmental sustainability, it is important landowners are aware of the costs and ongoing challenges associated with this type of renewable development, particularly where such development could see a landowner locked into an agreement for the next 10,20, or 30 plus years. However, if planned correctly, solar farms can make a reliable long term investments and become a valuable asset to a modern farming business.