For many farms in Indiana, electricity is one of the largest fixed-costs and one of the most difficult expense to control. Annually, utility electric rates increase by an average of 3%, while on-farm electric consumption usually increases as well. Farm expansion, increased production, new facilities and machinery all work to increase farms electric costs. These factors leave Indiana farmers with few options to mitigate this cost, because electricity is a business necessity, and most Indiana utilities and rural electric CO-OPs operate as monopolies in their respective district without alternative competitive options.
On-farm solar power is an energy solution option that Indiana farmers may want to consider closely. Solar installation costs have dropped significantly in the past few years and now farm projects are producing some compelling economics. The average solar installation for a Midwestern farm payback period is now at 7 years. This economic metric alone is attractive, due to the fact that the power production lifespan of a typical solar array is 30 years. The second most important metric in the solar agriculture calculus is the levelized-cost-of-energy (LCOE). This metric is the cost of electricity, after the implementation of solar, calculated over the life of the solar array. This is a number that factors in the cost of the solar system, along with the avoided utility cost of power that a system owner would have otherwise paid, and demonstrates an energy rate over the life of the system. Many times the LCOE is less than half of the cost of doing nothing.
Another item for Indiana farmers to consider while weighing the benefits of switching to solar is the USDA’s Rural Energy for America Program, also known as a REAP grant. This is a merit based grant which is scored by the USDA’s system that considers many factors in the solar project, such as type of farm grant applicant, solar project feasibility, energy offset, financing and total solar project economics. If the REAP application is strong and the project numbers are favorable, it increases the chances of being awarded. The maximum REAP grant for a Indiana solar project is a 25% reimbursement of the project cost. If awarded, this makes the implementation of solar for the farm very compelling.
Lastly, the solar Investment Tax Credit (I.T.C.) is an important considerations for the farmer to consider before making the decision to implement solar. The ITC is the federal 30% business tax credit for adoption. This is the IRS solar incentive that credits back to a business up to 30% of the cost of the solar project in a dollar per dollar credit against a federal tax obligation the business would have paid otherwise. This means that in order to make use of this tax credit, the business would have to have a tax appetite. The credit can be retroactive for the previous tax year or spread out over future tax years in order for businesses to claim the full 30% credit. 2019 is the last tax year for the full ITC, and the credit amount drops incrementally over the next few years until it drops to 10%. at which time it will remain at that percentage indefinitely.
Emergent Solar Completes 155kW Indiana Farm Solar Project
Emergent Solar Energy just completed a solar project for a large hog operation in northern Indiana. The project was a 155kW system that offset near 80% of the farm’s electric consumption. The project was award a USDA REAP grant and the farm utilized a term loan at a favorable interest rate from their AG lender, which helped the project cash flow and greatly improved the project economics. The CAFO farm had a very high monthly electric cost due to the hog barns exhaust fans which made the electric load steady and without spikes. Since the local utility allows for a net-metering agreement, not yet reaching the Indiana renewable energy cap, the farm was able to maximize the net-metering program at the retail rate. This means that the farm gets credit for the energy it pushes back over the meter at the same rate the utility charges it for power pulled off the grid.
You can lean more about our latest Indiana agricultural solar project by clicking on the links below: