Analysis: This case study shows how farmers can achieve significant energy savings and a swift return on investment with proper planning
By Barry Caslin, Teagasc
As the world pivots towards renewable energy, Irish farmers find themselves in a unique position to utilise solar power. With vast roof spaces on their sheds, farmers can now turn these often underutilised expanses into energy-generating assets. This opportunity not only allows them to meet their own energy needs but also provides the potential to contribute to the national grid.
Why consider solar PV on farms?
Farmers are blessed with extensive roof areas, making them ideal candidates for solar panel installations. With the current structure of Solar Capital Investment Scheme (SCIS) grants and tax incentives, the investment in solar PV systems can pay back 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.
Navigating the solar market
The Irish market is bustling with solar suppliers, each offering varying products with different quality and lifespan. It's crucial for farmers to conduct thorough research or seek independent advice to ensure they select a reliable supplier. Solar systems are most efficient when the energy produced is used on-site. Selling excess energy back to the grid is possible, but it usually fetches a lower rate than the cost of imported electricity. To maximise efficiency, installations can include battery storage and water heating systems, which help utilise excess energy produced during the day.
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From RTÉ Radio 1's Morning Ireland, Teagasc's Barry Caslin on a renewed push for rooftop solar on farm sheds
Understanding planning and permissions
Recent changes in Irish planning laws in October 2022, have made it easier for farmers to install solar panels without needing planning permission. Most rooftop installations on agricultural buildings are exempt, except near airports where restrictions apply. Ground-mounted systems also enjoy exemptions, provided they stay within specified size limits.
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.
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From RTÉ Radio 1's Countrywide, are sheep and solar made for each other? Countrywide visits a sheep farm in Co Wicklow that recently became the first Irish solar farm to connect to the grid
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.
Under the ESB Networks' simplified 'Mini-Generation' connection process, farmers have options for connecting solar PV systems based on the capacity of their electrical supply. For single-phase connections, the system can support up to 17kW through the inverter, translating to a solar PV output of 22-25kWp solar PV system. For three-phase connections, the limit is 50kW through the inverter, or roughly a 75kWp solar PV system. The farm's maximum import capacity also determines the system size that can be installed.
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From RTÉ Radio 1's Morning Ireland in 2021, Cian McCormack reports on a proposed microgeneration support scheme which allows people and communities sell electricity to the national grid
For microgeneration, small renewable-energy systems can now earn payments for surplus electricity fed into the grid. However, maximising on-site usage ensures the best return on investment. The grid connection process for systems up to 9kWp on single-phase and up to 15kWp on three-phase is straightforward and cost-free, with ESB Networks offering necessary upgrades at no charge. An NC6 form must be completed and submitted to ESB Networks.
Minigeneration systems, which range from 6kW to 17kW for single-phase and 11kW to 50kW for three-phase, require a technical assessment fee of approximately €1,000 with the completion of a NC7 form. While similar to commercial installations, agricultural solar PV projects have unique considerations that must be addressed during development.
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.
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From RTÉ Radio 1's Countrywide, who will be farming the land in the next generation?
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.
READ: Are you thinking of getting solar panels? Here's your checklist
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.
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Barry Caslin is an Energy & Rural Development Specialist with Teagasc.
The views expressed here are those of the author and do not represent or reflect the views of RTÉ
