How to Start a Solar Farm

The solar farm industry set new records for capacity in 2021. Solar farms were growing faster than other sources of energy, including wind farms and natural gas projects. In 2020, the solar industry was the number one type of new utility.

The cost of installing solar panels has been steadily decreasing, as technology catches up to the solar energy projects trend. Solar farms are emissions free, making solar energy a popular choice for renewable energy.

Are you thinking of starting your own solar farm? We’ve got the information you need.

What is a Solar Panel Farm?

There are two main types of solar farms:

Solar photovoltaic power stations – A number of solar panels are installed together to create a power plant.

CSP or Concentrated Solar Projects – Mirrors are used as solar modules to reflect the sun into a central collector to absorb energy.

Either way, the solar power is connected by power line into an electricity grid, or power grid, owned by a utility company.

From those basic descriptions, solar farms differ in scale and purpose. See below:

Types of Solar Farms Businesses

The technology is similar, but the scale of the solar power projects is different. Although there are CSPs in the US, the most common solar project uses solar panels to collect energy into a photovoltaic power station. The photovoltaic power structures then use power lines to connect.

Utility Scale Solar Farms

Utility scale solar farms produce at least 1 megawatt of power. Utility scale solar farms are usually much larger, producing up to 2,000 megawatts. To date, there are more than 10,000 utility scale solar electricity farms in the US.

To give you an idea of how much power a utility scale solar farm can produce, 1 megawatt can power 200 households.

Community Solar Farms

A community scale solar farm produces from 100 kilowatts(kW) to 5 megawatts (MW). A community solar farm is a large-scale solar project. The community solar panels create solar energy generation which is sold to power plants. The subscribers for that power company then get their energy bill adjusted, based on power output that the community solar panels produce, getting a percentage of their electricity bill reduced.

How Much Does It Cost to Start a Solar Farm?

On average, costs to build ground mounted solar arrays ranges from .82 to 1.36 per watt. That means that to build the infrastructure for solar facilities of 1 MW costs from $820,000 to $1.36 million.

That estimate includes the construction costs of solar installations, as well as other costs:

Negotiating permission to interconnect to a larger electricity grid using high voltage power lines – $30,000.

Solar company insurance – $23,000.

What about small scale solar facilities, such as rooftop solar gardens? Rooftop installations cost more to install, about $2.84 per watt. The energy generated will typically be less than 20 kW. Although the power produced is less, rooftop installations are popular for solar developers who don’t have the land needed for large scale solar development.

Are Renewable Energy Solar Farms Profitable?

Yes. A solar farm makes money through its Power Purchase Agreements. With the PPA, the solar farms that supply power wholesale were earning $24 per MW.

Through 2022, solar farmers could get an investment tax credit of 26% against their cost to develop solar technologies. It’s not certain that the investment tax credit will continue in future years, but with the need for clean ways to supply energy, it’s likely.

21 Important Steps to Start a Solar Farm Business

Solar panels stretch out for sizable distances. A solar farm requires a lot of room, but keep in mind that ground arrays are cheaper to install than rooftop solar parks.

The majority of zoning ordinances allow solar systems to be constructed on industrial or agricultural land. Otherwise, to develop a solar program you may have to appeal to planning and zoning municipal boards to allow your project by “special exception.” A special exception requires a public meeting.

1. Look at Your Competition

You can look at the websites for electric companies and see how much energy by percentage that they purchase from alternative sources. If they’re already purchasing energy from a solar farm, your research won’t be in vain – you’ll learn who the major players are in various areas.

To be a successful solar farm, you’ll need to be able to negotiate with utility companies. When you expand your research into other solar projects, you may learn the names or names of companies who have been successful in completing this very necessary step. Tron Solar in Illinois is a great example.

Research competitors, both regionally and nationally, to understand their business models, scale, and partnerships. Identify what they do well and areas where your solar farm can offer something different or better.

2. Get Professional Certification

Though not mandatory for investors, understanding solar energy technology and the business landscape is crucial. Consider certifications in renewable energy and business management to enhance your credibility and knowledge.

As an investor, you don’t need professional certification. But hiring a solar energy business consultant is a must if you have gaps in your knowledge.

To learn more about key positions necessary for a successful solar panel farm, check with the Solar Energy Industries Association.

3. Know Your Target Market

Define your primary market. Are you targeting utility companies, local governments, businesses, or residential communities? Understanding your market will guide your business strategy and sales approach.

Markets include both rural and urban residential electric companies. Some solar projects are specifically for educational institutions or specific large industries.

4. Choose a Business Name

Ensure the name is unique and resonates with your business’s vision. Check domain availability and social media presence for the chosen name.

Choose several business names. That way, before you settle on a name, you can check to make sure the web domain for that name is available, and that a business by the same name hasn’t already been registered in your state.

5. Create a Business Plan

Developing a comprehensive business plan is critical for the success and sustainability of your solar farm. Here are the key elements to include:

Executive Summary:

• Business Concept: Provide an overview of your solar farm business, including the scale of operations, the type of solar technology used, and your business model (e.g., selling energy to utility companies, businesses, or directly to residential consumers).
• Vision and Objectives: Outline your long-term vision for the solar farm and set clear, measurable objectives. This may include capacity goals, revenue targets, and environmental impact aspirations.
• Unique Selling Proposition: Highlight what sets your solar farm apart from competitors, such as advanced technology, strategic location, environmental sustainability practices, or unique business partnerships.

Company Information and Management

• Company Structure: Describe the legal structure of your business (LLC, partnership, corporation) and explain why this structure was chosen.
• Management Team: Detail the experience and qualifications of key team members. Include information on their roles and how they will contribute to the success of the solar farm.
• Advisory Board: If applicable, list any advisors or consultants who will assist in strategic decision-making.

Market Analysis

• Industry Overview: Provide an analysis of the solar energy industry, including current trends, potential growth, and key challenges.
• Target Market: Identify and describe your primary market segments (residential, commercial, educational institutions). Explain why these segments are your focus and how you plan to meet their energy needs.
• Competitive Analysis: Assess your competitors, their strengths and weaknesses, and how your solar farm will position itself in the market.

Operational Plan

• Location and Facilities: Detail the location of your solar farm, reasons for site selection, and any relevant information about the facilities, such as size and capacity.
• Construction and Installation: Outline the timeline and process for constructing and installing the solar panels and associated infrastructure.
• Operations Management: Describe the day-to-day operations, including energy production, monitoring, maintenance, and staff management.

Financial Plan

• Startup Costs: Itemize the initial costs involved in setting up the solar farm, including land acquisition, equipment purchase, and installation costs.
• Revenue Projections: Provide projected income statements, including revenue from energy sales and potential subsidies or incentives.
• Break-Even Analysis: Calculate the break-even point to understand when the business will start being profitable.
• Funding Requirements: If seeking funding, specify the amount needed and how it will be used.

Marketing and Sales Strategy

• Marketing Approach: Describe how you will promote your solar farm, including digital marketing, partnerships, community outreach, and participation in renewable energy programs.
• Sales Plan: Outline the strategy for selling your energy, whether through power purchase agreements, direct sales, or other distribution channels.

Long-Range Planning

• Growth Strategy: Discuss plans for scaling up the business, such as expanding the solar farm’s capacity or diversifying into other renewable energy sources.
• Risk Management: Identify potential risks (e.g., regulatory changes, market fluctuations) and your strategies for mitigating them.
• Sustainability Goals: Highlight any long-term environmental and sustainability goals and how you plan to achieve them.

Appendices

Include any additional documents that support your business plan, such as market research data, legal documents, detailed financial projections, or technical specifications of the solar technology.

Your business plan should be a living document that evolves as your solar farm develops and grows. It serves as a roadmap for your business and can be used to attract investors, secure financing, and guide your management decisions.

6. Brand Your Business

Develop a brand identity that reflects your commitment to sustainability and innovation. This includes a logo, company color scheme, and a consistent message across all marketing materials. Then, set up your website and launch your social media presence.

7. Form a Legal Entity and Register

You have a couple options and should enlist the advice of a tax specialist. You can operate the business as a limited liability company, a partnership or a corporation (s-corp or c-corp).

Consider the pros and cons of different business structures like LLC, partnership, or corporation. Consult with a legal advisor to understand the implications of each.

8. Open a Business Bank Account

You’ll need a separate bank account for your business and also a separate business credit card.  Choose a bank that offers services tailored to businesses, particularly those in the renewable energy sector. Look for banks that provide additional support like business advice and networking opportunities.

9. Find a Location

As we stated, most solar energy projects need plenty of acreage. And of course, that acreage must be suitable for solar business, such as agricultural or industrial. As a minimum, you’ll need at least 20 acres.  Analyze various factors like sunlight availability, land costs, and proximity to power grids. Also, consider the ease of obtaining permits and the local community’s reception to solar farms.

10. Make Sure Your Land is Suitable

What if you’ve found a large tract of suitable land, but it’s heavily wooded? Can you remove most or all of the trees, or are there restrictions on timber activities?

Is the land flat or rolling? For what percentage of daylight hours does the area receive sunlight?

Conduct a thorough land assessment, including soil testing, topography analysis, and environmental impact studies. Ensure there are no legal restrictions on using the land for a solar farm.

11. Purchase Insurance

As with most businesses, you’ll need general liability insurance. Obtain comprehensive insurance coverage that includes general liability, property insurance, and coverage for specific risks associated with solar farms.

You may also opt for “all risk” coverage as your project is developing. For example, the components of the system will be insured during transport to your site, during installation, during testing and into operations.

Other insurance policies needed will cover you for equipment breakdown and business interruption.

12. Purchase Necessary Equipment

For a successful solar farm, investing in the right equipment is crucial. Each component plays a vital role in the overall efficiency and functionality of the solar farm. Here’s a detailed look at the necessary equipment:

Solar Panels

• Types and Efficiency: Choose panels based on efficiency, durability, and cost. Monocrystalline panels are highly efficient but more expensive, while polycrystalline panels are cost-effective with slightly lower efficiency.
• Capacity: Determine the capacity needed based on your energy production goals. This will dictate the number and size of panels required.

Inverters

• Function: Convert the DC power generated by the panels into AC power for the grid.
• Types: Central inverters are suitable for large installations, while string inverters may be used for smaller setups. Consider newer technologies like microinverters for enhanced performance.

Racking Systems

• Durability: Ensure the racking system is durable and suitable for your geographic location, considering factors like wind and snow load.
• Tracking Systems: Consider investing in solar trackers that align the panels with the sun’s position to maximize energy production, though they come at a higher cost.

Performance Monitoring Systems

• Remote Monitoring: Implement systems that allow remote monitoring of each panel’s performance.
• Alert System: Ensure the system can send alerts for malfunctions or drops in efficiency, enabling prompt maintenance.

Grid Connection Equipment

• Grid-Tie Inverters: Essential for feeding electricity into the public grid.
• Safety Gear: Includes disconnects and protection equipment to ensure safe operation and compliance with grid standards.

Battery Storage Equipment

• Type: Choose between lead-acid and lithium-ion batteries based on your budget and storage needs.
• Capacity: Calculate storage capacity to ensure you can store excess energy, especially for days with lower sunlight.

Property Security System:

• Surveillance Cameras: Install cameras to monitor the site remotely for security purposes.
• Access Control: Implement systems to control access to the facility, protecting against unauthorized entry or vandalism.

Grounds Maintenance Equipment

• Vegetation Management: Regularly trim vegetation to prevent shading of panels and ensure unobstructed sunlight.
• Cleaning Equipment: Invest in equipment for cleaning panels to maintain optimal efficiency.
• Additional Considerations:
• Weather Monitoring Station: Install a weather station to monitor local weather conditions, which can affect solar production.
• Lightning Protection: In areas prone to lightning, install lightning protection systems to safeguard your equipment.

Sourcing and Suppliers

• Vendor Relationships: Establish good relationships with reputable suppliers to ensure quality equipment and reliable after-sales service.
• Warranties and Service Agreements: Secure warranties and maintenance agreements for major equipment purchases.

In addition to the equipment for your solar power plant, you’ll need fencing. With solar panels installed, you’ll need property maintenance and surveillance.

Purchasing the right equipment is a significant investment but crucial for the long-term success of your solar farm. Each piece of equipment should be selected based on quality, reliability, and suitability for your specific project needs.

13. Hire Employees

You’ll need an EIN (employer identification number) to correctly file taxes once you hire employees.

Recruit a skilled team including solar technicians, engineers, project managers, and administrative staff. Create a workplace culture that values safety, innovation, and teamwork.

14. Get Your Taxes in Order

You’ll also use your EIN when paying annual business income taxes to the IRS. You will also pay payroll taxes and pay property tax on your acreage.

Here’s where things can get dicey with tax assessment. If your panels and equipment can be easily removed (including being changed out for service or replacement), the asset may be viewed as personal property. If a tax assessing board views the panels and equipment as permanent, the asset will be taxed as real property (a much higher rate).

Work with a tax professional to understand the tax implications of running a solar farm, including incentives and credits available for renewable energy businesses.

15. Apply for Licenses and Permits

Navigate the regulatory landscape by obtaining all necessary permits and licenses. This may include environmental permits, construction permits, and grid interconnection approvals.

Once you’ve gotten approval to build and operate, your biggest permit needed will be Interconnection to the power grid. This is a job for your solar consultant, and/or an attorney skilled in the permitting and negotiating process.

16. Build Your Solar Farm

Plan the construction phase meticulously, considering timelines, contractor selection, and compliance with all regulations. Engage with local communities and stakeholders to maintain positive relations.

Start cementing your brand by scheduling a ground-breaking solar installation event and hosting local media.

17. Market Your Business

Here are key elements of your marketing plan: sales strategy, ongoing market analysis, long-range planning, and industry engagement (attend local and national solar power conventions).

Join your local Chamber of Commerce.

Develop a marketing strategy that highlights the benefits of solar energy. Collaborate with local businesses, join renewable energy associations, and participate in community events to raise awareness.

18. Expand Your Solar Farm Business

A savvy solar developer uses annual profits to buy more land. Without land, you can’t expand. Also explore opportunities for expansion, such as adding more panels, upgrading technology, or entering new markets. Keep an eye on industry trends and government policies to identify growth opportunities.

19. Develop Partnerships

Forge strategic partnerships with government agencies, energy companies, and other stakeholders. Partnerships can provide access to funding, new markets, and technical expertise.

20. Monitor and Optimize Energy Production

Regularly monitor the energy production of your solar farm. Use data analytics to optimize performance and identify areas for improvement.

21. Engage in Continuous Learning

Stay updated with the latest advancements in solar technology and energy policy. Encourage continuous learning and development within your team.

Benefits and Growth Trends in the Solar Farm Industry

The solar farm industry has witnessed remarkable growth and transformation, setting new records for capacity and emerging as a dominant player in the energy sector. This dynamic growth is attributed to a range of factors that underline the industry’s potential and significance:

• Record-Breaking Capacity: In 2021, solar farms achieved unprecedented capacity levels, outpacing other energy sources like wind farms and natural gas projects. This trend showcases the industry’s rapid advancement and increasing adoption.
• Surpassing Other Energy Sources: Solar farms have consistently demonstrated faster growth rates compared to other energy sectors. This includes wind farms and natural gas projects, reinforcing solar energy’s momentum.
• Leading New Utility Development: The solar industry claimed the top spot as the leading type of new utility in 2020. This achievement reflects the increasing prominence of solar energy in reshaping the global energy landscape.
• Declining Installation Costs: The cost of setting up solar panel farms has steadily decreased, making solar energy more accessible and financially viable. Technological advancements have played a pivotal role in driving down installation expenses.
• Emission-Free Energy: Solar farms provide emissions-free energy, positioning solar power as an attractive choice for sustainable and environmentally friendly energy solutions. This aligns with the growing emphasis on reducing carbon footprints.
• Rising Popularity of Renewable Energy: As the world shifts towards renewable energy sources, solar farms have gained popularity due to their clean and renewable nature. This aligns with global efforts to combat climate change and reduce reliance on fossil fuels.
• Potential for Entrepreneurs: The flourishing solar farm industry offers entrepreneurial opportunities for individuals and businesses to invest in a growing and impactful sector.
• Informed Decision-Making: For those considering venturing into solar farming, comprehensive information is essential to make informed decisions and capitalize on the industry’s potential.

In light of these trends and advantages, starting a solar farm presents a promising avenue for individuals and businesses aiming to contribute to sustainable energy solutions while benefiting from the industry’s growth.

Image: Depositphotos

This article, "How to Start a Solar Farm" was first published on Small Business Trends