Solar power - Is it the right investment for you?
Solar companies are taking out ads in the popular farm press and actively contacting farm owners in an effort to line up solar energy projects. There are reasons for all this attention.
First, land availability and large roof surface area make farms ideal locations for solar photovoltaic (PV) projects.
Second, since 2010, the quality of solar panels has increased while the cost to install a solar PV system has dramatically dropped (see pages 8 and 15 in the report entitled U.S. Solar Photovoltaic System Cost Benchmark: Q1 2017published by the National Renewable Energy Laboratory).
Third, financial assistance through the USDA Rural Development Rural Energy for America Program (REAP), Michigan Saves, and PACE help make investing in a solar PV project more attractive. And finally, the 30 percent Federal tax incentive for solar PV systems will be available for systems installed before Dec. 31, 2019, so taking advantage of this opportunity now before it expires has project feasibility implications. The tax incentive will be reduced each successive year until it expires on Dec. 31, 2021. These factors make investing in solar power attractive, but how can you be sure a solar energy project is a sound financial investment?
Your first step is to replace equipment that wastes electricity. It doesn’t make sense to generate electricity if it is used to run inefficient equipment around the farm. You want your farm to be as energy efficient as possible so you can maximize the value of the electricity you produce.
It is recommended that you hire a consultant trained to conduct a type 2 certified agricultural energy audit. A list of Michigan certified agricultural energy auditors can be found here. An energy audit is a comprehensive, scientific analysis of your farm’s energy use. Upon completion of the audit, you will receive an all-inclusive report detailing your energy usage, recommendations on how to improve the energy efficiency of your farm, and information on funding options to assist you with the implementation of energy-saving equipment.
If the auditor knows you are considering a solar power project, the potential energy savings impact of the project will be included in the final audit report. This is important to keep in mind because audits conducted through 2015 show that renewable energy projects reduce energy use (kWh) by 68 percent and have an annual energy savings of $12,225. These same projects have an average payback period of 8.7 years after eligible tax and financial incentives are attained. The majority of them were solar projects.
Armed with audit information, you are now ready to look at solar power project options. Under the net metering program in Michigan, farms can install on-site renewable energy electric generation projects sized no larger than what is needed to meet the farm’s electric energy needs. Farms are able to reduce their electricity purchases from their utility by using their generated electricity “behind the meter” and receive a credit for excess generation.
Due to the rapid growth of the solar power industry, there are plenty of firms to choose from. A list of Michigan-based solar companies can be found hereand here. You can use a third-party service to solicit and evaluate bids to help you get the best possible components, performance guarantees, and financing terms. Or you can do the legwork yourself. If you choose to do this on your own, make sure you get multiple bids. Check references for each firm you use. Compare the performance guarantees, system warranty, and component certifications offered by solar vendors.
If implementing a solar project seems a bit daunting to you or you want to know if a solar power proposal you already have on your desk is a good one, consider participating in a six-part webinar series sponsored by Michigan State University Extension. The webinar series features two solar power experts, Eric Romich with Ohio State University Extension and John Hay with the University of Nebraska-Lincoln Extension, and is based on the six bulletins in the Solar Electric Investment Analysis Bulletin Series.
Over the six sessions, Romich and Hay will help webinar participants take a critical look at the investment required for an on-farm solar electric system. Topics they will cover include estimating system production, forecasting the value of electricity, and conducting a financial analysis. The last webinar will be especially instructive as they will use a case study to illustrate what was taught in the previous five webinars. Farmers who participate in the webinar series will gain valuable, practical knowledge they can use to determine if a solar PV system is a sound financial investment for them.
Registration information and a complete schedule can be found at https://events.anr.msu.edu/SolarAnalysisWebinar/.
There are many funding opportunities to help defray the cost of renewable energy and energy efficiency projects. For solar PV and solar thermal projects, PACE, Michigan Saves, REAP, and the 30 percent Federal tax incentive are the financing options currently available.
For energy efficiency projects, funding is available through the USDA Natural Resources Conservation Service Environmental Quality Incentives Program (EQIP), REAP, electric utilities, PACE, Michigan Saves, and the Michigan Agency for Energy through Michigan State University.
The average cost of an audit is around $2,000 and these programs will pay for a large part or in some cases the entire cost of an audit. Funding to implement many energy efficiency practices can come from two sources and be used together. For example, a rebate from Consumers Energy and a grant from REAP can be used together to defray the cost of lighting upgrades.
This story was originally published on November 13, 2017 in the Michigan Farm News.