9/10/24, 10:12 AM How Much Does a Solar Farm Cost in September 2024?

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How Much Does a Solar Farm Cost? (2024)

Last Updated: Aug 29, 2024

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Leonardo David

FAQ

A solar farm is an area of land or installation that uses a large number of solar panels to collect
sunlight for electricity generation. Also known as a solar park or solar power plant, solar farms
are much more expensive than residential systems due to their size, but have a lower cost per
watt.

According to the National Renewable Energy Laboratory (NREL), solar farms cost $1.06 per
watt, whereas residential solar systems cost $3.16 per watt. In other words, a 1 megawatt (MW)
solar farm can cost upwards of $1 million. Read on to learn more about solar farm pricing, factors
that influence cost and more.

*In July 2024, SunPower notified dealers it would be halting all new shipments and project installations.
The company also noted it would “no longer be supporting new Leases and PPA sales nor new project
installations of these financing options.”

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Factors Influencing Solar Farm Costs

Several factors can influence the cost of installing a solar farm. Even a small solar farm can cost a
few million dollars — a 1 MW solar farm could cost between $890,000 and $1.01 million.
Comparatively, home solar systems cost $15,000 to $20,000 on average, and that price can drop
to less than $10,000 with solar incentives like the federal tax credit.

We will cover the main factors that influence the cost of large-scale PV installations in the
following sections.

Solar Project Size

While residential solar systems are typically sized in kilowatts, the installed capacity of a solar
farm reaches the scale of megawatts. One megawatt (MW) of solar capacity is equivalent to
1,000 kilowatts (kW), enough to power 173 homes according to the Solar Energy Industries
Association (SEIA).

Installed capacity is the main factor that determines the cost of a solar farm. At an average price
of $1.06 per watt, a 5 MW project would represent a $5.3 million investment, but a 100 MW
project can exceed $100 million.

You can classify solar farms based on the purpose of the project:

Utility-scale solar farms are built with the intention of selling electricity. The largest
projects can reach several hundred megawatts, powering thousands of homes and
businesses.

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Commercial and industrial solar farms are used to generate electricity on-site for business
operations, and most are below 10 MW of capacity.

Solar Farm Location

On average, one megawatt of solar capacity can generate electricity for 173 homes, but
productivity varies depending on local sunshine conditions. The SEIA has analyzed how the
productivity of solar farms varies by state. One solar megawatt can power over 250 homes in
sunny states like New Mexico, California and Hawaii, whereas one solar megawatt can only
power around 100 homes in a low-sunshine location like Washington.

For example, a solar farm designed to power 10,000 homes would require 40 to 50 MW of
capacity in the sunniest states. In a location with fewer sunlight hours, you may need up to 100
MW of installed capacity.

Sunlight is not the only factor that varies by location. If you plan to develop a solar farm in a
region with higher wages, the project budget may also increase due to local material and labor
costs.

Type of Solar Panel

There are three types of solar panels, which differ based on the photovoltaic (PV) material used
to convert sunlight into electricity. The type of solar panel you choose will influence solar farm
project costs.

Monocrystalline panels: The most common type of solar panel, which features the highest
efficiency and highest cost.

Polycrystalline panels: These panels cost less than monocrystalline versions, but offer lower
efficiency ratings.

Thin-film panels: Thin-film panels have the lowest efficiency and cost of the three types.

Compared to polycrystalline and monocrystalline panels, thin-film panels must cover a large area
to reach a given capacity. High-efficiency panels are more expensive, but you need less to reach a
project’s required megawatts. As a result, the three technologies can have similar installation
costs per watt.

According to a cost analysis by NREL, solar modules represent 35% of the installed cost of a solar
farm.

Regulations and Permitting Requirements

Solar farms are generally subject to more regulations and permitting requirements compared to
residential installations.

Local regulations and solar permitting requirements vary by state. Some state governments have
solar-friendly policies that favor solar installations and simplified approval requirements. But
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there are also locations where permitting a solar farm is difficult and expensive. Contact your
local government or utility for more information about solar farm regulations and permits in
your area.

Upfront Investment and Financial Planning

The NREL conducted a detailed solar cost analysis in 2021 that considers projects of varying
scales. According to the results, here is a general cost breakdown for megawatt-scale solar
projects per watt:

Solar Farm Component Cost Per Watt*

Solar modules $0.35

Solar inverter $0.03

Structural balance of system (BOS) $0.18

Electrical balance of system (BOS) $0.08

Installation labor and equipment $0.12

Contractor overhead $0.06

Sales tax $0.04

Permitting, inspection and interconnection (PII) $0.02

Transmission line costs $0.01

Developer overhead $0.02

Page 1 of 2
The NREL conducted a detailed solar cost analysis in 2021 that considers projects of varying
scales. According to the results, here is a general cost breakdown for megawatt-scale solar
projects per watt:*Costs are accurate as of 2021 and may have increased over time. Pricing may also
vary by location and project specifics.

Like residential installations, solar farms are eligible for the solar Investment Tax Credit (ITC).
However, there is an important rule for projects over 1 MW in size — the 30% tax credit is only
available for solar projects that meet local prevailing wage and apprenticeship requirements.
Otherwise, the tax credit amount is reduced to 6%.

Business-owned solar projects can qualify for bonus incentives, even if the installed capacity is
below 1 MW. Businesses can receive a 10% bonus tax credit for using equipment that meets
domestic content requirements specified by the ITC, which includes 100% domestic iron and
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steel. Another 10% bonus is available for projects located in designated “energy communities,”
including brownfields and former coal power station sites.

Community solar farms with less than 5 MW of installed capacity can receive a bonus tax credit
of up to 20% if intended for use by low-income communities.

Solar farms may qualify for additional incentives from state agencies or electricity utility
companies, depending on the state.

Solar Incentives by State

Maintenance and Operational Costs

Compared to other power generation systems, solar farms have simple maintenance
requirements. According to NREL, solar energy systems have annual operation and maintenance
costs of less than $15 per kilowatt or $15,000 per megawatt of installed capacity.

This estimate means a 10 MW solar farm will have annual operating and maintenance costs of
around $150,000. Considering a solar farm with an installed cost of $10.6 million, annual
operating and maintenance costs would equal around 1.4% of project costs.

Regular cleaning is the most important maintenance requirement of a solar farm. Dust can
accumulate on solar panels and block sunshine, resulting in a lower electricity output. Solar farm
operators must also monitor performance and inspect the PV array regularly to determine if any
components are malfunctioning. The best solar panels include a 25-year warranty to cover
manufacturer and performance issues for over two decades.

Cost Considerations and Risk Management

Homeowners can expect to pay around $15,000 to $20,000 for a residential solar system before
incentives. Prices are much higher when dealing with megawatt-scale projects — even a
relatively small solar farm with a 2 MW capacity can represent an investment of over $2 million.

The increased price differential can increase the financial risk of a solar project. For this reason, a
site assessment and feasibility study are important to consider before investing in a solar farm.
Choosing a site with large amounts of solar radiation can better ensure consistent energy
generation throughout the year.

Solar farm developers must also analyze local electric grid conditions to make sure transmission
lines can support a multi-megawatt solar array. Installing a residential solar system with less than

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10 kW of capacity does not affect the power grid as much as a 10 MW solar farm, which is like
connecting 1,000 homes with 10 kW at once.

Inventory management is also important with large-scale solar projects. Unlike a home solar
system, which typically has around 15 to 30 panels, a solar farm requires thousands. When
comparing brands, solar farm developers must also consider shipping times and availability. Solar
panels may be subject to significant import duties depending on where the modules are
manufactured.

The Bottom Line

The basic principle of home solar systems and large-scale solar farms is the same — installers
wire together solar PV panels to generate clean energy. Both systems use inverters to transform
the direct current (DC) generated by solar cells into the alternating current (AC) used by homes
and businesses. However, solar farms are thousands of times larger than home solar systems and
much more expensive as a result.

While solar farms are much more expensive than residential installations, the average cost per
kilowatt is lower. Based on data from the NREL, solar farms cost $1.06 per watt for large-scale
systems, compared to $3.16 per watt for residential installations. In other words, the cost per
kilowatt is around 66% lower for a solar farm, even if the overall project cost is thousands of
times higher.

Due to the scale involved, a solar farm is subject to more stringent permitting requirements than
a residential PV system. In many cases, solar developers must consider the cost of upgrading
local power lines to interconnect projects. Solar farms typically use ground-mounted systems
due to their size, but large commercial and industrial buildings can accommodate rooftop solar
farms.

Available solar farm installers will vary depending on your location. If you are seeking residential
solar, we suggest checking our guide to the best solar companies to learn more.

Get a Quote on Your Solar Installation in

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Frequently Asked Questions About the Cost of Solar

Farms

How profitable is a solar farm?

How much land is needed for a 100 MW solar farm?

According to the SEIA, utility-scale solar farms need around five to 10 acres of land per
megawatt of installed capacity. Based on this figure, a 100 MW solar power plant would require
between 500 and 1,000 acres of land.

How much power does a 1-acre solar farm produce?

How many homes can a solar farm power?

Is there an environmental benefit to installing a solar farm?

Methodology: Our System for Ranking the Best Solar

Companies
We closely evaluate solar installation companies with a focus on the factors most important to
homeowners like you. We based our solar company methodology on input from multiple
homeowner surveys, discussions with industry experts and research into the renewable energy
market. Our review process involves assessing each company on the following criteria, which we
then use to calculate a rating out of 5 stars.

Cost and payment options (20 points): Cost is one of the most important factors when
installing a solar energy system. Solar providers that offer cash purchases and in-house loan

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financing earn full points in this category. Companies also receive bonus points for offering
solar panel leasing or power purchase agreements (PPAs).

Services (20 points): In addition to solar installations, companies offering backup battery
and electric vehicle charger installations, energy efficiency audits and system monitoring
earn the most points in this category. Companies can also receive points for completing
installations in-house, as opposed to using third-party contractors.

Reputation (20 points): To assess the reputation of each company, we consider Google star
ratings, Better Business Bureau (BBB) scores and reviews, and NABCEP certification status.
We also look at customer complaint rates on sites like the BBB and weigh how the company
responds.

Warranty (15 points): We verify that each company offers workmanship, product and
performance warranties on all of its solar installs. A provider earns more points for
extending warranties that meet or exceed industry standards, including 10 years for system
workmanship and products and 25 years for panel performance.

Customer Support (10 points): Solar companies that offer virtual consultations, a mobile
app, 24/7 customer support and high customer satisfaction with backend support earn the
most points in this category.

Industry Experience (10 points): Providers with 10 or more years of experience in the solar
installation industry earn a perfect score in this category.

Sustainability (5 points):To measure sustainability, we assess each company based on

whether it shares a detailed sustainability statement or ESG disclosures on its website. We
also conduct research to see if companies offer end-of-life panel disposal programs or have
eco-friendly community partnerships.

Leonardo David is an electromechanical engineer, MBA, energy consultant and technical writer. His
energy-efficiency and solar consulting experience covers sectors including banking, textile
manufacturing, plastics processing, pharmaceutics, education, food processing, real estate and retail. He
has also been writing articles about energy and engineering topics since 2015.

Tori Addison is an editor with over five years of experience in the digital marketing industry. Her
includes communications and marketing work in the nonprofit, governmental and academic sectors. A
journalist by trade, she started her career covering politics and news in New York’s Hudson Valley. Her
work included coverage of local and state budgets, federal financial regulations and health care
legislation.

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9/10/24, 10:12 AM How Much Does a Solar Farm Cost in September 2024?

If you have feedback or questions about this article, please email the MarketWatch Guides team at
[email protected].

Meet the Team

Leonardo David
Contributor

Tori Addison
Editor

More Resources:

Best Solar Companies The Best Solar Panels How Much Do Solar
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