Considering solar energy? It can yield real cost savings on your farm

Farm examples of potential savings from solar energy systems.

one single solar panel in a hayfield
By producing off-grid electricity, a solar energy system can reduce the electricity costs on your farm. Photo by atimedia, Pixabay

Renewable energy is a growing area of interest for many farms. In particular, off-grid solar energy systems have become a popular form of renewable energy. Off-grid systems create energy from solar panels and are not connected to an electrical grid. By producing off-grid electricity, a solar energy system can reduce the electricity costs on your farm.

This article looks at the annual cost savings that can be achieved with a solar energy system. The second article in this series will discuss how installation costs can be reduced through government programs and tax savings.

To illustrate the cost savings from a solar energy system, let’s look at an example farm that has installed a 10-kilowatt system (1 kilowatt = 1,000 watts). This 10-kilowatt system costs $30,000 to be fully installed, using an average of $3 per watt. This example farm uses $3 per watt to calculate installation costs, which is often used as a starting point for most system design costs. System costs vary depending on components and the farm’s desired goals, which determine how much solar is needed. The design and cost of a solar system will also influence financing and returns on investment. For more information on designing a solar system, visit: Solar Electric Investment Analysis Bulletin Series.

A 10-kilowatt system generates approximately 10,950 kWh of electricity per year. This would provide $2,080 in electricity cost savings at $0.19 per kilowatt-hour. Residential rates are used as a standard for comparing off-grid solar systems. Residential cost per kWh can range from $0.06/kWh to $0.71/kWh, depending on location, electricity source, and when electricity is consumed. In 2022, Michigan had an average residential cost of $0.19 per kilowatt-hour (kWh). Repair and maintenance costs for solar energy systems can vary depending on components used, but the average cost for most 10-kilowatt systems is $20 per kilowatt per year or $200 annually. Thus, total electrical cost savings from this solar energy system would be $1,880 per year.

The key to fully realizing potential savings is in identifying the best design for your farm, as different types of farms often have different electrical needs. A solar system can be used for a single purpose or designed for multiple farm activities. If an off-grid solar system exceeds desired electricity production demand, some cost savings may go unrealized. Let’s look at three farm scenarios to illustrate potential uses of a solar system.

Scenario One: Dairy Farm

Dairy farms use a considerable amount of energy to operate. In particular, milk parlors consume large amounts of electricity for cooling milk, running various pumps, heating water, and lighting.

In a study by the University of Minnesota, a 300-cow dairy consumed 30,613 kWh per year to power a naturally ventilated barn with stirring fans and six automatic milking systems. At $0.19 per kWh, the total cost of electricity used by this system would be $5,816.47. Our example 10-kilowatt system could supply 10,950 kWh, which would generate $1,880 of electricity cost savings. This savings would reduce the electricity cost of this milking parlor system to $3,936.47.

Scenario Two: Fruit Farm

Many fruit farms use cold storage to extend the market seasons of their fruit. Cold storage uses a significant amount of energy. Figure 1 illustrates an example of the electricity use by on-farm cold storage facilities from the University of Wisconsin-Madison. The example reflects $0.19 per kWh costs and is based on a commercial cold storage unit measuring 12 x 12 x 9.

Figure 1. Updated example based on work by Scott Sanford, University of Wisconsin-Madison

Figure 1 shows that, on an annual basis, heating, refrigeration, and circulating fans and lights use  137 kWh, 2,783 kWh, and 3,166 kWh respectively. These three components of a cold storage unit require a total of approximately 6,086 kWh to operate. At $0.19 per kWh, it costs $1,156 per year to operate this example unit. Our example solar energy system could generate enough electricity to support the cold storage and offset this cost. The system could also generate an additional 4,864 kWh to use for other functions.

Cold storage facilities are just one of many electrical needs on a fruit farm. Often, they are located near repair shops or storage buildings. They may also be located near on-farm retail stores or packaging buildings. Solar designs could include a connection to all of these facilities. If the 4,864 kWh were used for one of these functions, an additional $724 could be saved for a total reduction in electricity costs of $1,880. Fully realizing the full potential benefits requires that a solar energy system be tailored to the needs of the farm.

Scenario Three: Corn Farm

Between dryers, cooling fans, and aeration practices, maintaining stored corn can use a lot of electricity, especially if corn is harvested at higher moisture levels and requires extra drying to be storable.

On average, drying grain with high temperature systems uses 0.01 kWh per bushel to remove 1% point of moisture. If corn was harvested at 20.5% moisture, it needs to be 15.5% to be considered dry. This is a difference of 5 percentage points or 0.05 kWh per bushel.

In 2021, Michigan corn growers averaged 186 bushels between owned and rented ground according to TelFarm’s 2021 Farm Business Analysis Report. A farm that raises 500 acres of corn would produce 93,000 bushels (180 x 500) of corn. To reach 15.5% moisture would consume 4,650 kWh of electricity (93,000 x 5 percentage points x 0.01 kWh). At $0.19 per kWh, 4,650 kWh would be an expense equaling $883.50.

Our example 10-kilowatt system would entirely cover drying costs, saving $883.5 in electricity cost. In the example 10 kWh system there would be an additional 5,350 kWh that could be used for other electrical demands on the farm, saving the farm $1,016.50, to provide the total $1,880 of electricity cost savings.

Despite generating significant savings in annual electricity costs, off-grid solar energy systems have struggled to demonstrate they are financially viable due in large part to their installation cost. However, with the passage of The Inflation Reduction Act, the costs of installation have never been more manageable. In our follow-up article “Don’t think you can afford a solar system for your farm? Think again!" we explore options that can significantly reduce installation costs of a solar energy system.

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