How Can I Get Funding for Solar Panels on My Farm?
Did you know that the U.S. Department of Agriculture (USDA) offers financial assistance to fund photovoltaic energy projects on your farm or ranch? Solar panels can increase your operation’s profitability and you may even be eligible for funding from government grant programs for solar panels. One of those grants called the Rural Energy for America Program (REAP).
At FarmRaise, we’re passionate about keeping farms financial solvent. If you’re looking for other ways to generate income check out our guide to maximizing your farm’s capabilities with side hustles.
In this post, our we’ll cover:
- Why solar energy may be a good fit for your farmers and ranchers
- Types of solar panel ownership
- Tips and funding opportunities for solar projects on your farm
But first, what’s this about “photovoltaic” initiatives? A photovoltaic system (PV system) is a more scientific word for the typical solar panel (or PV module) system we think of when we say “solar energy.”
Benefits of Solar Energy for Agricultural Producers
The USDA wants to incentivize farmers to make the upgrade toward more renewable energy systems. That’s apparent by their investment in sustainability climate Smart agriculture projects. But aside from government incentives, which we’ll talk about throughout this article, there are a lot of benefits for rethinking your energy use.
Solar panels can reduce your electric bill and reliance on nonrenewable energy. You can use the energy produced by your solar system in the place of electricity from the grid, and any surplus energy can be sole through solar energy programs.
There’s more you can do with solar panels that generate energy. Ever heard of agrovoltaics? It basically means using your land for both solar panels and for agricultural purposes. Here’s an example: Once you install your panels, you can plant shade crops under them. And studies have shown that it’s an effective way to address drought and water loss since solar panels can reduce the amount of evaporation of your irrigation water.
Tax Credits for Solar Installation
Every year the government decides how much tax credit you might receive for installing solar panels on your commercial farm or ranch. If your farm isn’t a commercial farm (growing at your home for your own sustenance with less than 450,000 per year in sales) then you’ll need to take a look at homeowner’s tax credits.
For commercial farmers and ranchers, you may be eligible for a tax credit on your federal corporate income taxes of 30% of the installation costs. But it’s important to note that you only get that credit for the year you install the PV system. However, you can still write off the cost of depreciation after your installation year.
How to Get Started with Solar Panels on Your Farm
Now that you know how solar might have a positive impact your farm finances, you can start considering how you might go about your clean energy journey. Here’s something to consider, though. You may be reducing your energy costs, but solar panels can be a significant financial investment initially. So how can a rural small business get financial assistance to make the switch possible?
Vertical
Vertical solar panel installation is one of the newest advents in agrivoltaic farming. Installing the solar panels vertically saves space so it may be a great option for smaller farms or farmers with little farmland available. Vertical solar farming can even save water lost to evaporation and is simpler to install because you don’t need to build elevated platforms to mount your panels on. Usually, solar panels need to be installed facing south but since vertical soar panels are two-sided they can faced in just about any direction and still be efficient.
Space efficiency: High
Energy output: High
Installation difficulty: Moderate
Growing Crops Under Panels and Raising Livestock
Vertical paneling isn’t the only way to maximize your farmland. Growing crops under solar panels is a great way to take advantage of the shade provided by conventional solar panels. This is especially advantageous for farmers who grow salad greens, raspberries, mint and other shade-tolerant produce. Growing crops under panels also helps reduce water use and may increase your yield.
Using land under and around solar panels for grazing is called “solar pasture.” While this may seem simple there are a few considerations to keep in mind. You’ll need to be strategic about what forage mixes can both grow around your panels and nourish your livestock. You should also install your panels in a livestock-friendly way. Got sheep? Make sure any emergency shutdown buttons on the panels mounts are not reachable. Cattle? If your bovine tend to stamped make sure your panels are installed high enough so they don’t knock down and stomp on them.
Space efficiency: High
Energy output: Moderate
Installation difficulty: Moderate
Cost: Moderate
Growing Row Crops
Similar to growing crops under solar panels, growing row crops is both possible and beneficial for your operation. When growing row crops, you can install your solar panels in a rows as well. The lower to the ground, the more shade your panel will provide to your crops. If you need full sun to grow your watermelon, corn or tomatoes, consider installing your panels on a higher mount.
Space efficiency: Moderate
Energy output: Moderate
Installation difficulty: Easy
Greenhouse, Barn or Residence
Much like conventional solar paneling for homes, you can take advantage of extra roof space by installing solar panels on the roof your greenhouse, barn or residence. The energy must be used for agricultural business purposes to qualify for REAP grants.
Space efficiency: Moderate
Energy output: Moderate
Installation difficulty: Easy
Solar Panel Ownership Basics
There are two ways to think about installing panels: Direct ownership or third-party ownership.
If you opt for third-party ownership, you’ll work with a solar company or group of investors to get panels installed on your land. However, the panels aren’t yours so the company or group will get the tax credits or any federal funding and you’ll also pay them for electricity produced by the solar system. Third-party ownership isn’t available in every U.S. state and island, so you’d also need to check if it’s available in your locality. The upside: you probably won’t pay a dime for installation or operation.
With direct ownership, you own the panels outright and the energy that comes from them. Even if you took out a loan to buy the panels, you’ll be able to take advantage of the tax incentives and government funding programs available to solar farmers.
But are there ways to install solar panels without needing a loan from the bank or financing from a solar company?
What is a tax credit?
A tax credit is a dollar-for-dollar reduction in the amount of income tax you would otherwise owe. For example, claiming a 450,000 federal tax credit reduces your federal income taxes due by 450,000. The federal tax credit is sometimes referred to as an Investment Tax Credit, or ITC, though is different from the ITC offered to businesses that own solar systems.
The federal residential solar energy credit is a tax credit that can be claimed on federal income taxes for a percentage of the cost of a solar PV system paid for by the taxpayer. ( Other types of renewable energy are also eligible for similar credits but are beyond the scope of this guidance.)
The installation of the system must be complete during the tax year.
Solar PV systems installed in 2020 and 2021 are eligible for a 26% tax credit. In August 2022, Congress passed an extension of the ITC, raising it to 30% for the installation of which was between 2022-2032. ( Systems installed on or before December 31, 2019 were also eligible for a 30% tax credit.) It will decrease to 26% for systems installed in 2033 and to 22% for systems installed in 2034. The tax credit expires starting in 2035 unless Congress renews it.
There is no maximum amount that can be claimed.
Am I eligible to claim the federal solar tax credit?
You might be eligible for this tax credit if you meet the following criteria:
- Your solar PV system was installed between January 1, 2017, and December 31, 2034.
- The solar PV system is located at a residence of yours in the United States.
- Either:
- You own the solar PV system (i.e., you purchased it with cash or through financing but you are neither leasing the system nor nor paying a solar company to purchase the electricity generated by the system).
- Or, you purchased an interest in an off-site community solar project, if the electricity generated is credited against, and does not exceed, your home’s electricity consumption. Notes: the IRS issued a statement (see link above) allowing a particular taxpayer to claim a tax credit for purchasing an interest in an off-site community solar project. However, this document, known as a private letter ruling or PLR, may not be relied on as precedent by other taxpayers. Also, you would not qualify if you only purchase the electricity from a community solar project.
What expenses are included?
The following expenses are included:
- Solar PV panels or PV cells (including those used to power an attic fan, but not the fan itself)
- Contractor labor costs for onsite preparation, assembly, or original installation, including permitting fees, inspection costs, and developer fees
- Balance-of-system equipment, including wiring, inverters, and mounting equipment
- Energy storage devices that have a capacity rating of 3 kilowatt-hours (kWh) or greater (for systems installed after December 31, 2022). If the storage is installed in a subsequent tax year to when the solar energy system is installed it is still eligible, however, the energy storage devices are still subject to the installation date requirements). Note: A private letter ruling may not be relied on as precedent by other taxpayers.
- Sales taxes on eligible expenses
Solar Share
Solar is a sustainable, emissions-free energy source that is an investment in your future, the environment and your community. Solar also can save you money on your energy bill when you install or select the right amount of solar for your home or business.
Upfront rooftop solar costs depend on what size system you need and your installer’s costs, and Solar Share costs depend on how much solar capacity you purchase.
Our Distributed Generation Rider allows customers to sell their excess solar generation back to Santee Cooper. The rider also provides a standby fee to cover fixed costs, such as maintenance of generation, transmission and distribution systems, that wouldn’t otherwise be fully collected from solar customers. The standby fee ensures those fixed costs are not shifted to non-solar customers.
- Residential Standby Fee: 4.40 X size of system (kW)
- Commercial Standby Fee: 4.70 X size of system (kW)
- Metering Fee: 5000.00
- Energy Credits (June-Sept.):
Distributed Generation Explained
Santee Cooper first offered distributed generation options to customers in 2010, when we launched a pilot rooftop solar program. Learn more about how we integrate distributed generation resources on the Santee Cooper power grid.
Solar can be a great investment. Before making a decision, do your homework, check from several sources, understand upfront and ongoing fees, and carefully consider what is right for you. As with all big-ticket purchases, beware of misleading sales tactics and scams.
.0416 per kilowatt hour returned
- Energy Credits (Oct May):
Frequently Asked Questions
The size of the system you choose will depend on a few factors, such as the amount of money you want to invest, the amount of electricity you want to produce, and the amount of space you have for installing solar panels. You should review your old electric bills to help determine how much electricity you business or home typically uses. Santee Cooper urges customers to size solar systems with the “offset” in mind. Below is a table comparing system size and “average” customer energy needs. For further assistance, a qualified Santee Cooper Solar Trade Ally or NABCEP Professional can help you determine what size system is right for your home/facility. For a list of qualified Santee Cooper Solar Trade Allies, please contact solar@santeecooper.com or (843) 946-5951.
This chart can give you an estimate of the size array you may need.
MEL users can find their average monthly usage under the Usage tab. All other customers can call us at 800-804-7424.
The type of maintenance that may be required of a system is dependent on the particular system you purchase. Please consult your solar installer and manufacturer to find out if any additional maintenance will be needed.
It depends on your system. Systems with battery backup will continue to have power. Systems without battery backup must shut down until the outage has been restored. Having electricity run into the grid from a solar electric system is a safety hazard for anyone working on the power lines.
Rebates are available for the solar electric portion of a system but not for the battery portion of the system. The rebate is based on the installed capacity (kW AC).
Financing options are available for Santee Cooper’s residential customers only. Santee Cooper also offers on-bill financing for qualifying residential customers through the Smart Energy Loan Program for Renewable Energy for up to 40,000. Learn more information about the loan program here.
If your building is not suitable for solar panels for any reason, participating in the Solar Share program may be a more viable option for you. Solar Share is a community solar program that allows Customers to subscribe to a portion of the energy generated by a Santee Cooper-sponsored community solar farm, without having to install a solar PV system at your home / facility. Customers subscribe to a certain number of blocks (measured in kW) to support the community solar farm, and receive a pro-rated share of the energy produced by the solar farm in the form of bill credits.
A REC represents the property rights to the environmental, social, and other non-power qualities of renewable energy generation. In exchange for rebates offered by the programs, Santee Cooper will retain the ownership of all RECs associated with customer installation of rooftop solar electric system and customer subscription through the Solar Share program.
Yes, applications for increasing the size of a system are subject to the Program Manual, rebate caps, Terms Conditions and other rebate program criteria in place at the time of acceptance of the rebate application. The total rebate per customer over the life of the program is capped at 6 kW.
All qualified Santee Cooper Trade Allies can assist in the rebate application process. Starting Dec. 1, 2019, only solar arrays that are installed by Santee Cooper Trade Allies will be eligible for program incentives.
Please check with your Homeowners Association or any Restrictive Covenants and Conditions first. If there are covenants and/or restrictions in your neighborhood regarding solar electric systems, and you are prohibited from installing a system, you will be ineligible to receive a rebate.
Solar Share – If you move out of Santee Cooper’s territory, Santee Cooper may buy back your solar subscription at a depreciated value, depending on the number of years you have held the subscription. Email solar@santeecooper.com for more information.
Solar Home – If you move out of Santee Cooper’s territory, the next homeowner will be required to sign an amended Interconnection Agreement and receive the credits outlined in the current DG Rider if the next homeowner is interested in retaining the PV system interconnected to Santee Cooper’s grid.
Solar Business – If you move out of Santee Cooper’s territory, the next Business owner will be required to sign an amended Interconnection Agreement and receive the credits outlined in the current DG Rider if the next business owner is interested in retaining the PV system interconnected to Santee Cooper’s grid.
No, the Interconnection Request Application and the Rebate Application are two separate components of the program. Rebate approval is contingent upon fulfilling all of the program requirements. Customers are eligible for rebates if they use a Santee Cooper Trade Ally.
The solar PV system rating must have a minimum rating of 1 kilowatt alternating current (“kW AC”) and must not exceed the lesser of 20 kW or the Customer’s annual peak electrical demand recorded over the past 12-month period from the date on which the Solar Home Application was signed.
.0384 per kilowatt hour returned
Is Texas a Good State for Solar Incentives?
Installing solar panels has continued to be come a growth industry as more people continue to find that the benefits and overall electricity savings that solar permits outweigh the upfront costs associated with them. But still that upfront costs continues to be one that many identify as the primary reason why they wont install solar. To combat this many government rebates and incentives exist on a local as well as State and Federal level. With Texas being the second largest state to adopt solar according to Statista, it’s no question that the popularity stems from some great saving wins.
The average cost of installing solar equipment in Texas ranges between 15,496 and 30,935 before any tax credits, rebates or incentive programs are considered. This is relative to the national average of around 24,000.
However, after the federal solar investment tax credit (ITC) is considered, the average system cost in Texas can drop to between 10,927 and 21,654. Of course, additional incentives can be applied to bring these costs down even further, making them a critical part of going solar in the Lone Star State.
In terms of solar adoption in Texas, as previously mentioned the state is ranked second in the country in terms of solar adoption, sitting just behind California. Unlike California’s solar adoption, the rate of photovoltaic (PV) adoption has more to do with the enormous energy needs of Texas residents and the abundance of sunlight rather than the availability of valuable incentives.
The Lone Star State is a decentralized one, opting to set the rules more at a city or county level rather than at a state level. As such, it is home to only a few statewide benefit programs, which are less appealing than in most other states. However, there are numerous local incentives available from local governments and utility companies that you might be able to take advantage of.
Freedom Solar Power
Blue Raven Solar
In the chart below, we’ll provide a quick list of all of the solar incentives that are currently available to Texas homeowners. Below that, we’ll provide additional information for each and explain how important each one is to keeping your conversion costs to a minimum.
Federal Solar Tax Credit (ITC) for Texans
The federal tax credit is the most valuable incentive available in Texas. This is provided by the federal government and guarantees a tax credit applied to your income tax burden for 30% of your system value.
It’s important to note that you can only take advantage of the full credit if your income taxes owed are higher than the credit value. You can, however, roll over any unused credit for five years. This helps you take advantage of the full amount, even if your income tax liability is too low the year you install your system.
In Texas, where the pre-incentive solar power system can cost over 30,000, the typical credit amount is 9,281. This assumes that you install a system size of 11.5 kilowatts (kW) and pay the average cost per watt in the area, which is around 5000.69.
The federal credit was originally offered in 2006 to all U.S. residents. At that time, the credit amount was also 30%. The rate dropped to 26% in 2022 and was meant to drop again to 22% in 2023 and then expire in 2024.
Thankfully, as part of the Inflation Reduction Act, and in an effort to continue to promote solar adoption throughout the country, the federal government extended the credit and reinstated the original credit rate. The rates are now scheduled to change as follows:
- 30% for all systems installed through 2032
- The rate will drop to 26% for systems installed in 2033
- It will drop again to 22% for systems installed in 2034
- The credit will no longer be available for systems installed in or after 2035 2
Claiming the federal credit is not terribly time-consuming, and the process itself is simple. You’ll be ready to claim the credit when you file your taxes for the year your system is installed and commissioned. You can follow the steps below at that time.
- Step 1:Print out IRS form 5695 to fill out, or notify your accountant that they’ll need to fill out the form for you.
- Step 2: Go through the form and fill in any applicable information. You’ll usually need to know things like the address where your system was installed, the total price you paid for the system, the system capacity, the name of your solar company and more. You should have any paperwork provided by your solar installation company handy before you begin.
- Step 3: File the form along with your taxes. If you’re using automated filing software, you’ll usually be prompted to answer a question about whether you installed a solar array for that tax year.
There are some incentives that you can do without, especially if the benefit you receive is minimal and the time investment to file is significant. However, the federal credit is an absolutely essential incentive, in our opinion.
This perk is the most appealing because it can provide a credit of up to 10,000 in some cases, and the form you need to fill out usually takes less than 10 minutes. The minimal time it will take you to file for this credit is well worth it, especially since you can get a credit of nearly a third of your entire system cost.
Texas’ Renewable Energy Systems Property Tax Exemption
The property tax exemption prevents your taxes from increasing after you install your solar system.
Under normal circumstances, a home improvement that raises your property value will also bump up your assessed value. Since your taxes are determined using your assessed value, they will go up as well.
Installing a solar energy system is expected to bump up your Texas home value by over 4%, which is a significant increase. 3 This would typically cause your taxes to increase, but the tax exemption in the state of Texas prevents that from happening.
Instead, your system value is not considered when determining your assessed value, which means your taxes shouldn’t change at all as a result of going solar.
It’s challenging to estimate exactly how much this will save you over time, as the savings depend on your home value, your taxes and your system size and value.
However, if we assume you pay around 30,000 for your solar array, the 1.8% property tax rate in TX would equate to an annual savings of over 500 every year on your tax bill.
Disregarding system depreciation, that’s over 10,000 saved on taxes over the life of your system. This benefit is more valuable in areas with high property value, like Dallas, Austin and Houston.
How to Claim the Property Tax Exemption in Texas (click to expand)
Similar to the federal credit, the property tax exemption just requires a single form to be filed for your home. You can follow the brief instructions below to claim the exemption:
- First, download Form 50-123 from the Texas Comptroller’s website, which is the Exemption Application for Solar or WInd-Powered Energy Devices
- Next, fill out the form. It’s just a few pages long and will require general information about your solar power system
- Finally, file the form with the Comptroller’s office
Once you file the form, your property taxes will be adjusted, and the value of your solar system will be disregarded.
Is the Property Tax Exemption Worth the Time/Effort of Claiming in Texas? (click to expand)
This tax exemption is another crucial piece of the puzzle when it comes to maximizing your solar savings. This exemption is a great incentive in any state where it’s offered, but it’s especially important in Texas.
The Lone Star State doesn’t have a state income tax and instead uses an above-average property tax rate to collect taxes. It ranks seventh in the country for the highest property tax rate, with an average rate of 1.8%. 4 Since the property tax rate is high in Texas, taking the property tax exemption is especially important.
Taking advantage of this exemption also only takes a few minutes and minimal paperwork, so the amount saved is absolutely worth the time and effort, in our opinion.
Texas Solar Rights
The last statewide incentive in Texas is the solar rights afforded to property owners. These ensure that all residents have equal and unimpeded access to solar panel installation and solar energy.
The solar rights laws in Texas prohibit homeowners associations (HOA), villages and other entities from preventing rooftop solar installations.
This isn’t a financial incentive, but it does help promote the legitimacy and importance of solar energy in Texas.
How to Claim the Texas Solar Rights (click to expand)
The solar rights afforded to you in TX don’t require anything to claim. They are automatically granted to you, so you’ll always have access to them.
Are the Texas Solar Rights Worth the Time/Effort of Claiming? (click to expand)
While they don’t provide any financial assistance for converting to clean energy, the solar rights in Texas are a great policy that helps more property owners adopt solar.