How Much Money Does 1 Acre Of Solar Panels Make?

One of the best investments you can make right now is to build a solar farm.

A 1 acre of panels can make you approximately $28,000 per year with an average ROI of about 15%.

Obviously, the exact amount of money you’ll make depends on many factors, such as how much sunlight your land receives, the capacity of the solar farm, and electricity prices in your area.

So if you need to learn more about how much money does 1 acre of panels makes and how much can you make from leasing your land for a solar farm, keep reading.

Table of Contents

Key Takeaways

A solar farm on 1 acre can yield around $28,000 annually with an average 15% ROI.
Earnings from a solar farm are impacted by sunlight exposure, system efficiency, land lease rates, grid connectivity costs, wholesale electricity rates, REC values, and incentives.
Building a 1-acre solar farm costs between $170,000 and $215,000, targeting a 10-20% ROI and a 7-year payback period.
Leasing land for solar farms offers additional income opportunities, potentially earning landowners $250 to $3,000 per acre annually based on various factors.

What Is A Solar Farm?

A solar farm, also known as a solar park or solar power plant, is a huge solar installation that typically consists of thousands of photovoltaic panels arranged in big arrays.

These solar farms are just like your typical power plants but instead of using fossil fuels to generate electricity, they “harvest” sunlight and convert it into electricity AKA solar farming.

This generated electricity is then sold to utilities or directly to consumers, earning money for the owners of the solar farms in the process.

How Much Money Does 1 Acre of Solar Panels Make per Year?

The amount of money you can potentially profit per acre of solar panels largely depends on where you are building the solar farm and the capacity of the solar power plant (how much electricity it produces.)

On average, 1 acre of solar panels produces about 337.5MWh of electricity per year, and given a wholesale electricity price of $83 per MWh, then it’s safe to assume that your 1-acre solar farms can make around $28,000 per year.

Needless to say, this is just an average, in reality, you can expect to make an annual solar farm profit of anywhere between $21,250 and $42,500 per acre.

How Many Solar Panels Fit in One Acre?

An acre of land is 43,560ft².

And the average commercial solar panel size is 21.6ft², so accounting for the mounting hardware and spacing for maintenance and other issues, let’s say the solar panel size is 30ft².

By dividing 43,560ft² by 30ft², we get 1,452 solar panels per acre.

With an average solar panel wattage of 300W, then you can install 435.6kW of solar panels.

Now, it’s important to mention that we assumed that you would fill the entire acre of land with panels but this isn’t how solar farms are built.

You still need other components, such as inverters and electrical distribution units, which take up space as well.

So on average, you should expect to have about 200kW of solar panels per acre.

How Much Power Will 1 Acre of Solar Panels Produce?

To calculate how much power will a 1 acre of solar panels produces, first, we must know the amount of solar irradiation the panels receive, also known as peak sun hours.

Peak sun hours refers to the number of hours where the sunlight intensity averages 1,000W/m².

So when we say that location gets 4 peak sun hours per day, it’s like saying it receives 4,000W/m² of solar irradiance per day.

Assuming that I’ll build a 200kW solar farm in California where I receive an average of 5.31 peak sun hours per day or 1,940 peak sun hours per year.

Then, the amount of power a 1 acre of solar panels produces can be calculated using the following formula:

Power Output (kWh) = Solar Plant Size (kW) x Number of Peak Sun Hours (h) x 0.83

So my solar farms will produce 200kW x 1940h = 337,560 kWh/year or 337.5MWh/year.

Note: The 0.83 multiplier comes from power losses, as commercial solar power systems lose some power due to heat, shading, debris, voltage mismatch, etc.

Factors Influencing the Earnings of a 1-Acre Solar Farm

1. Sunlight Exposure

Consider two locations: Phoenix, Arizona, and Seattle, Washington.

Phoenix, one of the sunniest cities in the United States, averages about 299 sunny days per year.

In contrast, Seattle is known for its cloudy weather, with far fewer sunny days.

A solar farm in Phoenix could potentially generate significantly more electricity than one in Seattle due to this difference in sunlight exposure, directly impacting revenue.

For instance, a solar farm in Phoenix might generate around 30% more electricity than a similarly sized farm in Seattle, leading to higher earnings.

2. Solar System Conditions

A well-maintained solar panel system can operate at an efficiency of about 15-20%.

Over time, panels can accumulate dust and debris, which can reduce their efficiency. Regular cleaning and maintenance can prevent this loss.

For example, a study found that dirty solar panels can lose up to 25% of their efficiency.

If a solar farm generates $10,000 worth of electricity annually, a 25% loss in efficiency could mean $2,500 lost due to poor maintenance.

3. Land Lease Rate

Land lease rates can vary significantly based on location.

For instance, leasing land in rural Iowa might cost around $500 per acre per year, whereas leasing land near a major California city could be as high as $4,000 per acre per year.

This difference can greatly affect the net profit of a solar farm.

If a 1-acre solar farm generates $20,000 in revenue annually, the lease cost in California could take up 20% of that revenue, compared to just 2.5% in Iowa.

4. Proximity to Distribution Lines

The cost of connecting a solar farm to the grid can vary widely.

For a solar farm located 1 mile from the nearest three-phase power line, the connection cost might be around $15,000 to $25,000.

However, if a farm is located 5 miles away, this cost could skyrocket to $100,000 or more due to the need for additional infrastructure.

This upfront investment can significantly impact the initial profitability and payback period of the solar farm.

5. Wholesale Electricity Rate

Electricity rates can vary from state to state.

For instance, the wholesale electricity rate might be 4 cents per kilowatt-hour (kWh) in Texas but 6 cents per kWh in New York.

Assuming a 1-acre solar farm produces 250,000 kWh per year, the annual revenue from electricity sales alone could be $10,000 in Texas versus $15,000 in New York, showcasing the impact of regional wholesale rates on earnings.

6. RECs Rates

The value of Renewable Energy Certificates (RECs) can also vary.

In some states, RECs might sell for $10 each, while in others, they could be worth $50.

If a solar farm generates enough electricity to be awarded 500 RECs in a year, this could mean an additional income of $5,000 in the former case and $25,000 in the latter.

This variance emphasizes the importance of RECs as an income stream for solar farms.

7. Incentives

Incentives can greatly enhance the profitability of solar farms.

For example, the Federal Investment Tax Credit (ITC) allows for a deduction of 26% of the cost of installing a solar energy system from federal taxes.

Additionally, some states offer extra incentives, such as California’s Self-Generation Incentive Program (SGIP), which provides rebates for installing energy storage systems.

These incentives can significantly reduce the initial investment costs and improve the return on investment for solar farms.

How Much Would a 1-Acre Solar Farm Cost?

According to the Solar Energy Industries Association (SEIA), solar farm installation costs are between $0.85 and $1.07 per watt of capacity.

And since a 1 acre of land can hold about 200kW of panels, then the total cost to build your 1-acre solar farm would range between $170,000 and $215,000.

Solar Farm ROI

Solar farms give one of the best returns on investment (ROI) in the solar industry.

The average solar farm ROI is between 10% and 20%, so you should expect a payback period of about 7 years.

How Much Can You Make Leasing Your Land for Solar Farms?

You can make an annual profit of between $250 and $3,000 per acre from leasing your land to solar farms.

Of course, the exact number depends on how much sunlight your land receives, the soil quality, how far the land is from three-phase distribution lines, land prices in your area, and many more.