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How to Start a Solar Farm

Written by:

Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.

Edited by:

David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.

How to Start a Solar Farm

Fast Facts

Investment range

$1,020,400 - $2,070,700

Revenue potential

$240,000 - $600,000 p.a.

Time to build

3 – 5 years

Profit potential

$216,000 - $540,000 p.a.

Industry trend

Growing

Commitment

Flexible

Solar power is worth $185 billion globally and still seeing explosive growth. With your own solar farm — a large field of photovoltaic panels linked to the grid — you could generate good money while also doing good for the environment.

The initial investment of about $1 million is considerable, but there is an alternative: if you own or buy a sizable piece of land, you could lease it to your local utility company, which would then build and maintain the solar farm and pay you a share of the revenue. After some years, you might be able to take financial control of the farm and expand further.

Either way, starting a solar farm is challenging and requires time and hard work. Starting off with the right knowledge is crucial, and this step-by-step guide provides all the information and insight you need to begin building your solar empire.

Step 1: Decide if the Business Is Right for You

Pros and cons

Every business has pros and cons that you should consider before deciding if it’s right for you.

Pros

  • Eco-friendly – Solar power is good for the environment
  • Good Money – Profit margins in solar are high
  • Minimal Work – A solar farm need servicing just 3-4 times per year

Cons

High Startup Costs – Building a farm costs $1M and up

Solar industry trends

Since the US instituted a major tax credit for solar projects in 2006, the US solar industry has grown 100-fold, according to the Solar Energy Industries Association.((https://www.seia.org/initiatives/solar-investment-tax-credit-itc))

In terms of trends, the storage capacity of solar batteries has increased in recent years, which helps stabilize the solar grid on your farm and reduce wasteful production. In addition, a rising number of US households are installing solar panels. Shipments of solar modules for residences increased a stunning 33% in 2020, according to the Energy Information Administration. Homeowners can also sell excess energy from their solar panels to the power company, as 40 states allow homeowners to do so.((https://www.eia.gov/todayinenergy/detail.php?id=49396))

Industry size and growth

solar industry size and growth

Trends and challenges

solar industry Trends and Challenges

Trends in solar farms include:

  • Increasing use of solar batteries with higher storage capacity
  • More US households installing solar panels
  • Strong demand for clean, renewable energy
  • Growing concern over climate change

Challenges in solar farms include:

  • High initial investment in solar panels
  • Supply chain issues to impact solar panel production

Consumer spending

solar industry consumer spending

Price differences across the country

Solar industry price differences

What kind of people work in solar farms?

solar industry demographics

How much does it cost to start a solar farm business?

Startup costs for a solar farm range from $1 million to $2 million and more. The lower end is for a one-megawatt farm, which is the minimum you need for the power company to be interested, and assumes you already have 6-8 acres of land. The higher-end is for a two-megawatt farm and includes a down payment for the land purchase. If you instead decide to lease your land to a utility company, they will pay for the farm’s development and your costs will be next to nothing.

Startup CostsBallpark RangeAverage
Setting up a business name and corporation$150 - $200$175
Licenses and permits$20,000 - $30,000$25,000
Insurance $250 - $500$375
Land purchase down payment$0 - $40,000$20,000
Solar system installation$1,000,000 - $2,000,000$1,500,000
Total$1,020,400 - $2,070,700$1,545,550

How much can you earn from a solar farm business?

The per-acre profit of a solar farm runs between $20,000 and $40,000, with an average of $30,000. After costs your profit margin should be about 90%.

Development

solar farm development business earnings forecast

If you have a 20-acre property and you develop only eight acres into a solar farm, bringing in $30,000 per acre. Your annual revenue will be $240,000, and your profit will be $216,000. As you gain more customers, you could fully develop the entire 20 acres. You’ll be earning $600,000 in annual revenue and $540,000 in profit. You could expand your farm over time by using your profits to purchase more land and add to your grid, thus increasing your income substantially.

Lease

solar farm lease earnings forecast

If you lease your land, you can probably earn $2,000 per acre per year. With 8 acres at $2,000 per acre, you’ll make $16,000 in annual revenue and at least $14,000 in profit. If you lease out the entire 20 acres, you’ll make $40,000 in annual revenue and $36,000 in profit. It’ll be a good source of passive income.

What barriers to entry are there?

There are a few barriers to entry for a solar farm. Your biggest challenges will be:

  • Costs to develop a solar farm are high
  • A sun-drenched swathe of land
  • Permission from the utility, which can take years

Related Business Ideas

If you’re still not sure whether this business idea is the right choice for you, here are some related business opportunities to help you on your path to entrepreneurial success.
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Step 2: Hone Your Idea

develop a business idea

Now that you know what’s involved in starting a solar farm, it’s a good idea to hone your concept in preparation to enter a competitive market.

Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.

Why? Identify an opportunity

You should research whether your land is right for a solar farm. You should look for:

  • Minimum of 6-8 acres, flat and no flood-risk
  • At least four peak sun hours daily
  • No regulations in terms of conservation
  • Within a few miles of the power grid

What? Determine your solar farm revenue strategy

You need to determine if you want to lease your land or develop your solar farm. By leasing your farm, you can start with minimal cost, but make far less money. With a farm, your revenue potential is much higher, but your upfront costs are significant.

How much should you charge for solar?

The price you charge for power will be dictated by how much the power company is willing to lease your land for. A good lease could mean $2,000 per acre per year. Strong revenue for a developed solar farm is $30,000 per acre per year. 

Once you know your costs, you can use this our profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market will be power companies and solar developers. You should find them via internet search and contact them directly via phone or email.

Where? Choose the location for your solar farm

The location of your solar farm is a critical factor in its success. Look for a location with plenty of sunlight, minimal shading, and adequate land availability. Consider the proximity to the power grid and transmission lines, as well as any regulatory requirements for solar farms in the area.

Additionally, assess the local demand for renewable energy and the potential market for your solar farm’s electricity. Consider the economic and political climate in the area, as well as any incentives or subsidies that may be available.

When selecting your location, consider factors such as access to water, soil quality, and any environmental considerations. The right location can help optimize your solar farm’s energy production and ensure the sustainability of your operation.

By carefully choosing the location of your solar farm, you can establish a profitable and sustainable business that contributes to the growth of renewable energy and helps combat climate change.

solar farm business idea rating

Step 3: Brainstorm a Solar Farm Company Name

Here are some ideas for brainstorming your business name:

  • Short, unique, and catchy names tend to stand out
  • Names that are easy to say and spell tend to do better
  • The name should be relevant to your product or service offerings
  • Ask around — family, friends, colleagues, social media — for suggestions
  • Including keywords, such as “solar” or “solar power”, boosts SEO
  • Choose a name that allows for expansion: “Bright Future Solar Farms” over “Commercial Solar Farms” or “Residential Solar Farms”
  • A location-based name can help establish a strong connection with your local community and help with the SEO but might hinder future expansion

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that set your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a Solar Farm Business Plan

Here are the key components of a business plan:

what to include in a business plan
  • Executive Summary: Outline the goals and strategies of your solar farm business, emphasizing renewable energy production and potential contributions to the regional power grid.
  • Business Overview: Describe your solar farm’s operations, including generating solar energy and selling it to utilities or directly to consumers.
  • Product and Services: Detail the core service of electricity generation using photovoltaic panels, and any additional services like energy storage or leasing solar equipment.
  • Market Analysis: Assess the demand for renewable energy in your region and identify potential buyers like local utilities, businesses, or government entities.
  • Competitive Analysis: Compare your solar farm to others in the area, focusing on factors like energy output capacity, technological efficiency, or location advantages.
  • Sales and Marketing: Outline your approach for securing contracts and partnerships with energy buyers and other stakeholders in the renewable energy sector.
  • Management Team: Highlight the experience and qualifications of your team, especially in areas like renewable energy, project management, and environmental regulations.
  • Operations Plan: Describe the operational process of your solar farm, including installation, maintenance of solar panels, and energy distribution.
  • Financial Plan: Provide an overview of financial aspects such as investment costs, revenue models, and long-term profitability projections.
  • Appendix: Include supplementary documents like site plans, environmental impact studies, or power purchase agreements that support your business plan.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as sunnier states could offer real advantages when it comes to solar farms.

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your solar farm will shape your taxes, personal liability, and business registration requirements, so choose wisely.

Here are the main options:

types of business structures
  • Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
  • General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
  • Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
  • C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
  • S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just needs to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have. 

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Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

The IRS website also offers a tax-payers checklist, and taxes can be filed online.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

types of business funding
  • Bank loans: This is the most common method, but getting approved requires a rock-solid business plan and strong credit history.
  • SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
  • Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
  • Venture capital: Offer potential investors an ownership stake in exchange for funds, keeping in mind that you would be sacrificing some control over your business.
  • Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
  • Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
  • Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best options, other than friends and family, for funding a solar farm. You might also try crowdfunding if you have an innovative concept.

Step 8: Apply for Solar Farm Business Licenses and Permits

Business Licenses and Permits

Starting a solar farm business requires obtaining a number of licenses and permits from local, state, and federal governments.

Solar farms are subject to strict review processes through federal, state, and local regulators. They also require permission from a power company. The process for approvals usually takes 3 to 5 years.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your solar farm as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

types of business insurance
  • General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
  • Business Property: Provides coverage for your equipment and supplies.
  • Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
  • Worker’s compensation: Provides compensation to employees injured on the job.
  • Property: Covers your physical space, whether it is a cart, storefront, or office.
  • Commercial auto: Protection for your company-owned vehicle.
  • Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
  • Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of any of the above insurance types.

Step 11: Prepare to Launch

Launching a Business

As opening day nears, prepare for launch by reviewing and improving some key elements of your business.

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.

You can use industry-specific software, such as quickbase, 3 megawatt, or enact, to manage your solar installation and measure energy generated.

Accounting

  • Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero
  • If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.

You can create your own website using website builders. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

Your clients are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

Marketing

Here are some powerful marketing strategies for your future business:

  • Identify Your Target Market: Understand who your primary customers will be. This could include local businesses, government entities, and residential communities. Tailor your marketing message to address their specific energy needs and concerns.
  • Leverage Green Credentials: Emphasize the environmental benefits of solar energy. Highlight how using solar energy reduces carbon footprints and supports sustainable living. This can be a strong selling point for environmentally conscious consumers.
  • Utilize Digital Marketing: Create a strong online presence with a professional website showcasing your solar farm’s capabilities, benefits, and services. Use social media platforms to engage with your audience, share relevant content, and build a community around renewable energy.
  • Content Marketing: Develop informative content that educates your audience about solar energy, its benefits, and how your solar farm contributes to the energy landscape. Blog posts, videos, infographics, and webinars are effective tools.
  • Partnerships and Networking: Collaborate with local businesses, environmental groups, and educational institutions. Networking can lead to partnerships that not only expand your market reach but also provide mutual benefits.
  • Government Incentives and Policies: Stay informed about government incentives for renewable energy and use this information in your marketing. Educating potential clients about available subsidies or tax breaks can be a persuasive marketing tool.
  • Community Engagement: Engage with the local community through events, sponsorships, or educational programs. Building a positive community presence can enhance your brand and increase local support.
  • Testimonials and Case Studies: Share success stories and testimonials from satisfied customers. Case studies demonstrating the effectiveness and savings from your solar farm can be compelling evidence for potential clients.
  • Competitive Pricing Strategies: Ensure your pricing is competitive and offers value for money. Consider flexible pricing models to attract a wider range of customers.
  • After-Sales Service and Support: Highlight the quality of your customer service and after-sales support. Providing excellent service can lead to referrals and repeat business.

Focus on USPs

unique selling proposition

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your solar farm meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your solar farm could be:

  • Stable supply of clean, renewable energy 
  • Efficient solar storage solutions
  • Maintenance-free and environment-friendly 

Step 12: Build Your Team

Building a Team for a New Business

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a solar farm business would include:

  • Maintenance Workers – Maintain your solar panels and grid
  • General Manager – Oversee maintenance, accounting

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.

Step 13: Run a Solar Farm – Start Making Money!

Running a Business

Solar power is the future of energy and it’s good for the planet since it’s clean and renewable. By starting a solar farm, you’re doing your community a service and making money at the same time. 

The US solar market is worth more than $11 billion and growing rapidly, which means your solar farm should provide sizable profits with little effort once it’s up and running. Alternatively, leasing your land for a solar farm costs essentially nothing but will add a nice stream of passive income. Now that you have the information you need, you’re ready to start building your solar empire!

Solar Farm Business FAQs

How profitable is a solar farm?

If you develop a solar farm, once it’s up and running, you should make $30,000 per acre per year. If you lease your land for a solar farm, you can make $2,000 per acre per year.

How do I get my land approved for a solar farm?

You will need to contact federal, state, and local regulators to start the permitting and approval process, which can take 3 to 5 years. You will also need to contact the local power company for approval.

How much land do I need for a solar farm?

The general rule is 6 to 8 acres at minimum. This is enough to develop a 1-megawatt solar farm.

How do I ensure proper installation and maintenance of solar panels?

Conduct a thorough site assessment to determine the optimal location for installation, considering factors such as sunlight exposure, shading, and structural integrity. Follow manufacturer guidelines and industry standards for the installation process, including proper mounting, wiring, and electrical connections. Regularly inspect and clean the solar panels to remove dirt, dust, or debris that can reduce their efficiency.

What are the environmental and sustainability benefits of a solar farm?

Solar farms provide several environmental and sustainability benefits, including:

  • Renewable energy generation: Solar farms harness sunlight to generate clean and renewable energy, reducing reliance on fossil fuels and greenhouse gas emissions.
  • Carbon footprint reduction: By displacing energy generated from fossil fuels, solar farms contribute to reducing carbon dioxide and other harmful emissions that contribute to climate change.
  • Water conservation: Solar farms have minimal water requirements compared to other forms of energy generation, reducing strain on local water resources.
  • Land preservation: Solar farms can be built on existing open spaces, including unused or degraded land, minimizing the need for new land development.
  • Local economic benefits: Solar farms create job opportunities during construction and ongoing operations, stimulating local economies and providing long-term revenue streams.
What are the best practices for managing and monitoring solar farm operations?

Best practices for managing and monitoring solar farm operations include regular maintenance and inspection of solar panels and equipment, monitoring energy production and system performance, implementing remote monitoring and control systems, establishing a preventive maintenance schedule, conducting periodic performance assessments and analysis, and providing staff training and education.

How can I assess the potential solar resource and energy production of my solar farm?

To assess the potential solar resource and energy production of a solar farm, you can conduct a solar resource assessment using historical solar irradiance data, perform a feasibility study including a site visit, and utilize solar modeling software or online tools that consider parameters like panel type, tilt angle, and shading.

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How to Start a Solar Farm