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How to Start a Solar Farm Business in (2024): Step-by-Step Guide

10 Min Read

how to start a solar farm
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Fast Facts

  • Startup costs: $829,000-$1.54 million
  • Industry trend: Emerging
  • Difficulty: High
  • Profitability: 5-30%
  • Time to build: 1-5 years
  • Commitment: Full-time

Introduction

The businesses worldwide are tapping into the clean energy markets and if you are someone looking for an exciting opportunity, solar farms are a perfect choice for you.

Over the past few years, the size of solar markets has grown faster than other energy sources. These businesses offer an excellent ROI and minimum maintenance once it’s all set to run.

Now, setting up a solar farm requires consideration of varying aspects such as location, licenses, marketing, equipment, and installation- the details that we will cover in the following blog.

Ready to dive in? Let’s get you answers to how to start a solar farm in clearly detailed steps.

How much money do you need to start a Solar Farm?

The average cost of starting solar farms in the US varies between $829,000-$1.54 million and more. These costs are heavily influenced by multiple factors such as costs, the amount of solar energy generated, the type of solar panels installed, and the grants received.

How profitable are Renewable Energy Solar Farms?

Absolutely, solar farms are profitable.

The largest and most consistent form of earnings for their solar panels business is through PPA (power purchase agreement).

Solar farms earn approximately $24 per MW by supplying power-generated solar energy to wholesale businesses. Moreover, these farms can get a solar investment tax credit of 30% against their cost to develop technologies.

Solar Farm Industry Highlights and Trends

The renewable energy sector is the most rewarding segment in the current marketplace. However, if you are starting a solar venture, here are a few highlights and trends from the industry you must consider:

  • Superior energy source: In comparison with other energy sources, solar farms have demonstrated the fastest growth rate in the energy sector making it a dominant player.
  • The growing prominence: According to SEIA, the solar industry will add 32 GW of new capacity by 2023 bringing a 52% increment in total energy capacity from 2022.
  • Affordable installation: The cost of solar installation has reduced drastically over the past few years owing to terrific innovations in the technology.
  • Solar panels optimization: After a solar panel reaches the end of its life, nearly 90-97% of materials can be recycled and reused for further use in other industries.
  • Global growth rate: Between 2023-2028, the global solar farm market is expected to grow at a CAGR of 18.5%.
  • Community solar farm: The small but promising community solar market offers exciting opportunities for small-scale entrepreneurs wanting to venture into this field. By 2030, CCSA targets generating 30 GW of community solar power.

Indeed, the field of solar enterprise is promising. However, let’s have a quick look at its cons as well.

Pros and Cons of Starting a Solar Farm

Wondering about the solar farm business benefits for your new project? Well, there are pros as well as cons to starting a farm business. Let’s quickly analyze the few.

Pros

  • Recurring revenue: Long-term regular income through power purchase agreements (PPA).
  • Low operating costs: The maintenance and operational costs are pretty low.
  • Incentives and schemes: Variety of government schemes in the solar farm sector.

Cons

  • High startup costs: The initial solar farm costs are extremely high-ranging up to millions.
  • Competition: Saturated with large-scale solar development ventures.
  • Regulatory challenges: A large number of government compliances and rules.

Now that you know the pros and cons of solar farms, let’s move further and decode a guide to starting a successful solar farm.

How to Start a Solar Farm: A Complete Guide

The solar farm industry is growing at a phenomenal rate with thousands of solar farms opening every year. This step-by-step guide will detail every process essential in setting up your own solar panel farm.

1. Select a Solar Farm Business Type

As the first step, determine the type of solar farm you want to start. The type of solar farm will dictate the requirement for licenses, location, equipment, and investment.

Usually, one of these two categories of solar farms exists in the solar industry:

Utility-scale Solar Farms

These solar power plants serve the wholesale utility companies which eventually sell the generated electricity to commercial, residential, and industrial customers.

The power generation at these solar power projects is extremely high producing at least 1 megawatt of electricity.

You will obviously need large solar panels installed, many acres of land, high voltage power lines, and investment to start utility-scale solar farms.

Community Solar Farms:

Also known as rooftop solar gardens or roofless solar, community solar farm eliminates the need to install solar panels on individual roofs. They resemble utility power plants, however, they are much smaller in size.

Community solar farms earn their revenue by leasing a part of their solar farm to individual buyers or offering subscription services to the community.

These solar farms are very popular in the solar industry. They supply energy to individual buyers in the form of electricity who are happier with a reduced electricity bill.

Community solar farms differ from the earlier one in terms of costs, complexity, and the target market.

Now, make your choice between utility and community solar farms before diving deep into the study of market research and analysis.

2. Assess Your Competition and Target Market

Create a solid foundation for your solar panel business by gathering extensive details on the solar industry, renewable energy segment, and your target market.

Good quality market research helps assess the target audience, competition, and emerging market trends to help you set up a well-proofed solar farm.

Try answering the following questions to form a comprehensive research:

  • Who will be your target audience? Will you serve some utility company, a specific energy industry, or residential households?
  • Who are your competitors? Identify the other solar farm businesses catering to your audience.
  • How much farmland will your idea require?
  • What is the cost of solar panels per acre?
  • How much investment is required to set up a farm and what is the ROI on solar farms?

This process will provide you with the innate understanding required to set up your solar power plant.

3. Choose a Business Name

Finalizing a business name is an equally important part of setting up your own solar farm. Pick a unique name that resonates with your solar business and get it registered with the state.

Ensure that the name is available in the domain selection and choose a DBA (doing business as) name.

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4. Prepare a Solar Farm Business Plan

A business plan is a must whether you plan to start a small community farm or a utility-scale solar project.

A comprehensive actionable plan includes detailed documentation of the following:

  • Executive Summary
  • Company Overview
  • Industry and market analysis
  • Products and services
  • Operations plan
  • Key management team
  • Marketing and sales plan
  • Financial plan

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5. Find a Suitable Location for Your Farm

The location is very important for solar farms to operate successfully. Start looking for agricultural or industrial land suitable for solar farms. The acreage of land depends on the scale of your operations.

A solar venture will require a minimum of 15-20 acres of land to build solar panels to generate solar energy. However, you can also buy a small portion of land on an existing farm to set up your community solar panels.

At this stage, you need to analyze the following aspects to source your ideal location:

  • Purchasing or renting the land for a solar panel farm.
  • Solar energy generation of your photovoltaic power stations.
  • Lease rental agreement- minimum of 50 years advisable

6. Register Your Solar Farm

Register your business with the state to make it legally compliant.

Consult a tax specialist to determine the right form of business structure for solar farms. Ideally, LLC, partnership, or corporation are suitable entity forms for solar energy projects.

At this stage, also acquire the EIN number of your own solar energy business.

7. Obtain Necessary Licenses and Permits

Ensure further compliance by acquiring essential licenses and permits for your solar panel farms.

Here is a quick checklist of licenses you need to apply for:

  • Local and state licenses
  • Environmental permits
  • Electrical permits
  • Grading and excavation permits
  • Land zoning permits

Now, depending on your particular project and the state guidelines, you may require special permits.

For instance, you will require an interconnection agreement with the utility company, if the solar power plant will connect to a local power grid.

8. Get Business Insurance

While we are discussing compliance, also acquire

solar company insurance for solar farms. A variety of risks and casualties engulf the renewable energy business.

Apart from the general liability insurance, consider getting an umbrella insurance to offer coverage against property, assets, and equipment damage in case of casualties and accidents.

9. Get Necessary Equipment

Make a list of solar equipment and solar facilities you will require to generate concentrated solar power in your solar farms:

  • Solar arrays/ Solar panels
  • Solar power grid
  • Inverters
  • Energy storage equipment
  • Photovoltaic power structures (mounting structures)
  • Metering and monitoring equipment
  • Power output equipment
  • Solar technologies

The solar farm installation costs are quite high. However, you need professional help to undertake solar panel construction and make solar installations at your solar farms.

10. Build a Team

From solar installations to fitting power lines and solar panels construction; a lot needs to be done to set up an energy-producing solar plant. Build a team to look after the operations and construction at your solar farms.

Map out your hiring plan after considering the following positions:

  • Solar developers
  • Project managers
  • Technicians
  • Site inspectors
  • Data analysts
  • Administrative Staff

The need for employees varies depending on whether you plan to start a utility-scale solar farm or a community solar panels venture. Make your hiring plans accordingly.

11. Market and Launch Your Solar Farm

The millions on your solar farm investment can be realized only when you establish yourself as a solid brand in the market. Prepare the marketing plan for your utility-scale solar business covering the key aspects:

  • Sales strategy for your solar project
  • Website marketing
  • Print release
  • Local media coverage
  • Newsletters
  • Social media marketing

Identify the prevalent marketing practices of other solar farm developers and continue to experiment with different marketing mixes.

Conclusion

All ready to reach the skies with the success of your solar farms? Now, let’s take the first step and write a stellar business plan for your solar farm business.

An actionable plan will offer a roadmap to set up a successful business and will ensure that every aspect of the business is addressed appropriately.

Now download the Upmetrics sample solar farm business plan and use it as a reference point to build your business.

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About the Author

Vinay                                                       
            Kevadiya

Vinay Kevadiya

Vinay Kevadiya is the founder and CEO of Upmetrics, the #1 business planning software. His ultimate goal with Upmetrics is to revolutionize how entrepreneurs create, manage, and execute their business plans. He enjoys sharing his insights on business planning and other relevant topics through his articles and blog posts. Read more

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