Solar for agricultural producers
Depending on location, agricultural producers have two main ways to pay for solar:
- Direct ownership
- Third-party ownership (if available in your state)
Direct ownership means you, the farm owner, will purchase the system for your property and will own all of its electrical output. Direct ownership of a system makes sense for your farm, if you are able to raise funds for the cost of the project, can pay cash up front, or get access to specific state incentives and grants.
Under third-party ownership, a separate entity, such as a solar developer or a group of community investors, owns and operates the solar system on behalf of the farm. The agricultural producer then pays the third party for the monthly electricity produced by the solar system. In this scenario, the third party will take advantage of the federal tax credit and any additional incentives and can pass the savings on to the farm. Third-party ownership is only available in certain states. Find out where.
A few special considerations
The cost of a solar system depends on its size, location, market forces, and the availability of incentives and tax credits. Fortunately, farmers who want to go solar can get access to excellent funding and financing opportunities.
- Accelerated Depreciation: The Modified Accelerated Cost Recovery System (MACRS) allows businesses to recover investments in assets through tax deductions. Businesses can deduct 85 percent of the value of qualified solar equipment over a five-year period. To learn more about accelerated depreciation, read this article from the Solar Energy Industries Association. Talk to your accountant about how best to manage the tax benefits of going solar.
- Rural Energy for America Program (REAP): This USDA program offers loans and grants for solar systems.
- REAP provides competitive grant funding and guaranteed loan financing to agricultural producers and rural small businesses for renewable energy systems or energy efficiency improvements.
- Agricultural producers with at least 50 percent of gross income coming from on-site agricultural operations are eligible to apply for competitive grant funding and guaranteed loan financing through REAP.
- Competitive grants are available for up to 25 percent of total eligible project costs. Loan guarantees are available for up to 75 percent of total eligible project costs. Combined grant funding and loan guarantees are available for up to 75 percent of total eligible project costs.
- Get help going solar with USDA REAP grant funding – join Solar United Neighbors‘ membership program for Farms & Small Businesses!
- Learn more about USDA REAP in our free webinar or at the USDA website.
- The USDA Natural Resources Conservation Service’s Environmental Quality Incentives Program (EQIP) On-Farm Energy Initiative provides financial assistance for farmers and ranchers to analyze energy use and improve energy efficiency on the farm.
- The Colorado Energy Office’s Agricultural Energy Efficiency (AgEE) program provides a turnkey approach – including a no-cost energy audit and technical assistance – to help Colorado ag producers increase on-farm economic and environmental sustainability.
- Minnesota‘s Clean Energy Resource Teams connect farmers with the resources they need to save energy and take advantage of renewable energy resources like solar.
- Rural Action’s Sustainable Energy Solutions program provides application preparation services and technical assistance to Ohio farms and businesses seeking to apply for USDA REAP grant funding.
- Indiana-based Prosperity Ag provides USDA REAP grant-writing services for farms and rural businesses nationwide.
- Solar power for the modern poultry farm – This resource guide comes from the National Poultry Technology Center.