Everything farmers need to know about putting solar panels on sheds
Barry Caslin highlights how farmers, blessed with extensive roof areas ideal for solar panel installations, can turn these underutilized areas into energy-generating assets. This can help meet their energy needs & provide the potential to contribute to the national grid.
Why consider solar PV on farms?
The current structure of Solar Capital Investment Scheme (SCIS) grants and tax incentives can give a pay back on the investment in solar PV systems in less than three years. This makes solar energy a viable and attractive option for farmers looking to transition to renewable energy sources. It's not just a short-term gain; it's a 25 to 30-year investment that can benefit future generations on the farm.
Financial incentives and grants
The Targeted Agricultural Modernisation Scheme (TAMS) includes the Solar Capital Investment Scheme (SCIS), offering up to 60% grant aid for solar PV systems. Importantly, this grant is separate from other TAMS funding, allowing farmers to invest without affecting their eligibility for additional grants available through TAMS.
Tax and cost considerations
Farm-generated solar power is fully tax-deductible in the year of installation. Farmers can claim grants up to 60% for solar panels and battery systems, making it a financially sound investment. The Department of Agriculture restricts the capacity of grant-aided systems to match the farm's prior year's energy use, ensuring the energy produced is primarily for agricultural purposes.
Technical and structural considerations
Before installation, it's essential to evaluate the structural integrity of the farm buildings. Older roofs, especially those made of asbestos or fibre-cement, may require reinforcement. A structural engineer's assessment can help ensure the roof can support the added weight (20 – 30 kg per panel) of the solar panels.
Grid connection and energy export
Farmers can sell surplus energy back to the grid, but optimising self-consumption is key for the best returns. Remote farms might face challenges connecting to the grid, which could require additional investments to strengthen local network capacity.
Case Study: Solar PV investment for a dairy farm
Background
This case study examines the potential benefits and financial implications for a dairy farmer considering the installation of a solar PV system. The farm's annual electricity usage cost is approximately €15,925, equating to around 45,500 kWh of electricity at an average cost of 35 cents per kWh. The electricity usage is distributed as follows: 70% during the day and 30% at night. Key electricity-consuming equipment includes:
- Bulk tank: 52%
- Hot water: 22%
- Vacuum pump: 19%
- Lighting: 6%
Proposed solar system
Based on a thorough farm survey, the recommendation was to install a 30kW solar PV system with 15kWh battery storage and a water heating system. The system will occupy about 180 square meters of roof space, equivalent to just over three spans of a 9-meter wide shed.
Cost analysis
The total cost of the system is estimated at €64,276, including VAT at 13.5%. However, farmers can reclaim VAT by VAT 58, and after the 60% grant on the balance, the net cost reduces significantly:
- Total Cost: €64,276
- VAT Reclaimed: Assuming VAT is 13.5%, the VAT component is €7,645.
- Net Cost after VAT Reclaim: €56,631
- 60% Grant on Net Cost: €33,979
- Final Net Cost: €22,640 (€56,619 - €33,979)
Tax benefits
Farmers benefit from a 100% tax write-off in the first year. They also save on USC and PRSI. Claiming capital allowances is optional and the allowances can be carried forward. The savings on tax depend on the amount of tax the farmer is due to pay prior to taking account of the solar PV investment.
Standard rate (20%) - If the farmer's income falls within the standard tax band, the tax savings could be €4,528, potentially reducing the net outlay to €18,112.
Higher rate (40%) - If the farmer's income is taxed at the higher rate, the tax savings would be €9,056, potentially reducing the net outlay to €13,584.
Farming company (12.5% CT tax) - Tax savings of up to €2,830, resulting in a potential net outlay of €19,810.
System output and savings
The system is expected to generate approximately 27,000 kWh per year, covering 59% of the farm's annual electricity usage. The farmer can utilise 65% of this electricity on-site with the aid of battery storage and a water heating diverter, yielding significant savings:
On-site usage (65%) - 17,550 kWh, saving approximately €6,142 annually.
Exported electricity (35%) - 9,450 kWh, earning about €1,512 per year at 16 cents per kWh.
Payback period
Considering these savings, the payback period for the solar system investment is less than three years. Afterward, approximately 65% of the farm's electricity will be generated at no cost. €22,640 / €7,654 = 2.95 years. This calculation does not include the cost of financing the panels or the taxation benefits.
This case study illustrates a viable investment model for farmers considering solar PV systems. With proper planning and utilisation of available grants and tax benefits, farmers can achieve significant energy savings and a swift return on investment. Importantly, including the farmhouse electricity use in the overall farm consumption strengthens the business case.
For Irish farmers, installing solar panels on shed roofs represents a practical step forward in sustainable farming. It not only reduces energy costs but also aligns with global movements towards greener practices.
This is a shortened version of an article by Teagasc specialist Barry Caslin which was first published on RTE Brainstorm. Read the full article 'Everything farmers need to know about putting solar panels on sheds' on RTE Brainstorm