Solar Subsidies Amount to $56,000 per Acre
It's all about the Benjamins, baby
I’m going to make him an offer he can’t refuse- Marlon Brando in The Godfather.
According to the Solar Energy Industries Association, total U.S. solar capacity is expected to reach 142,187 megawatts (MW) direct current of utility-scale installed capacity by the end of 2024. As a rule of thumb, the average solar facility requires 8 acres per MW, meaning that by the end of the year, more than 1.1 million acres of land will be used to host solar facilities.
As
has tirelessly chronicled, the proliferation of these facilities, fueled by the taxpayer-funded Investment Tax Credit (ITC), a subsidy allowing solar developers to claim at least 30 percent of a project’s costs as a tax credit, has led to concerns from local residents about the loss of property values, visual blight, and the loss of productive farmland.Concerns about the loss of farmland are not without merit. According to an April 2024 report in Reuters, “The solar industry is pushing into the U.S. Midwest, drawn by cheaper land rents, access to electric transmission, and a wealth of federal and state incentives. The region also has what solar needs: wide-open fields.”
Here, the “wealth” federal subsidies is the driving factor. Based on our calculations, solar developers electing the ITC will receive $56,000 per acre for their solar facilities, or $2,253 per acre for each year of the solar facility’s useful life.
The Math
Using capital cost estimates for solar from the U.S. Energy Information Administration’s Capital Cost and Performance Characteristics for Utility-Scale Electric Power Generating Technologies, we see that EIA estimates the cost of utility-scale solar is $1.5 million per MW of installed capacity.
Under the IRA, solar developers can get at least 30 percent of these capital costs back in the form of the Investment Tax Credit. This means that the subsidies for each MW of installed capacity amount to $450,600. Using our rule of thumb of eight acres per MW of installed capacity means the subsidies paid to solar developers amount to $56,325 per acre, or $2,253 per acre over the projected useful 25-year lifetime of the solar panels.
These subsidies have resulted in massive contracts for farmers and landowners to host solar facilities on their land. The April 2024 report in Reuters states that solar leases in Indiana and surrounding states can offer $900 to $1,500 an acre per year in land rents, with annual rate increases, according to a Reuters review of solar leases and interviews with four solar project developers.
This is far higher than the rents paid for agricultural land. The American Farm Bureau compiled data from the U.S. Department of Agriculture (USDA) National Agricultural Statistics Service and produced the map below showing the average cropland cash rent value by state. As you can see, Indiana’s average cash rent value of $231 per acre is four to 6.5 times lower than the leases paid by solar developers.
There is simply no way that agricultural production can compete with the contracts being awarded by solar developers, especially when one considers the money from solar developers requires no work or additional investment for the farmer, who no longer needs to purchase inputs like seeds, herbicides, and fertilizers, and the time they no longer need to spend preparing the fields for planting, spreading fertilizer, spraying for weeds, or harvesting the crops.
In essence, the lavish subsidies paid to solar developers allow them to make offers to farmers that they can’t refuse.
More Subsidies Ahead
In 2022, the so-called Inflation Reduction Act was passed along partisan lines to spur the development of wind, solar, and other politically favored energy sources using trillions of your tax dollars.
As
and Joshua Loucks note in a recent Substack article, the subsidies in the IRA are massive, with initial estimates of $369 billion over the first ten years of the program. But Fisher and Loucks argue the true cost of the IRA could reach more than $1 trillion in the first ten years of the policy and between $2 trillion to $4 trillion by 2050.Unless the IRA is repealed, the massive sums of taxpayer dollars at stake will cause even more acres of American farmland to go from under the plow to under the panel. According to the Solar Energy Industries Association, the amount of solar installed in the country is expected to grow by 450,000 MW in the next ten years.
Assuming that utility-scale installations constitute 68 percent of these capacity additions, which is consistent with trends to date, it means that an additional 2.4 million acres would be converted to solar facilities. As much as 80 percent of the land used for solar could be farmland, resulting in about 1.9 million acres being taken out of production.
Conclusion
The United States is blessed with 390 million acres of cropland, and American farmers are always finding ways to produce more food on fewer acres. However, we should also be asking ourselves if subsidizing a massive expansion of intermittent solar power on prime farmland is a wise public policy.
Considering we could continue to use our reliable coal, natural gas, and nuclear power plants—and build more when necessary—to produce more electricity, more reliably, on far less land, the value proposition is dubious, at best.
If farmers and landowners want to pursue solar, we understand that the economic incentives are strong. However, given the largess of federal tax credits, they might want to hold out for a bigger slice of the $56,000 pie.
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