15 Feb, 2024

Unlocking solar potential on Irish farms: Calculating payback periods for sustainable returns

Irish farmers are increasingly turning to solar energy, accounting for 13.6% of the country’s electricity demand in 2022. This article explores the essential considerations for calculating the payback period, crucial for assessing the viability of solar investments on Irish farms.

1. Installation Costs:

  • Upfront investment in solar panels, inverters, and installation services is vital.

  • Determining the optimal system size involves analysing the farm’s electricity consumption over the last 12 months.

  • Installation costs range from €1,000 to €1,500 per kW, with larger installations being more cost- effective.

2. Types of Solar Technology:

  • The choice between glass-glass and glass-foil panels impacts costs and quality.

  • Glass-glass panels, though pricier, offer better warranties, lasting up to 87% performance after 30 years.

3. Government Incentives:

  • TAMS 3 and the Solar Capital Investment Scheme provide significant grants, affecting the payback period.

  • The Non-Domestic Microgen Grant and SEAI Solar PV Grant Aid offer financial assistance for solar panel installations.

4. Energy Savings:

  • Calculating potential energy savings involves assessing historical consumption, local sunlight conditions, and system efficiency.

  • A 6.6kWp system generating around 5,800 kWh per year typically yields a 20% net return on investment.

  • Battery storage is beneficial for peak demand times.

5. Feed-in Tariffs and Excess Energy:

  • Excess energy can be fed back into the grid, creating additional revenue through feed-in tariffs.

  • The Microgeneration Scheme supports selling surplus renewable energy, offering options like net metering and feed-in tariffs.

  • Farmers should be cautious of utility contracts that offset benefits with higher fixed-term prices for bought-in electricity.

6. Maintenance Costs:

  • While solar panels have low maintenance costs, regular upkeep is crucial for optimal performance.

  • Cleaning every 1-2 years and annual inverter servicing are essential.

7. Lifespan of the System:

  • Solar panels often exceed 25 years in lifespan, with reputable manufacturers offering extended production warranties.

  • Calculating the payback involves considering the duration of the investment and when the system covers its initial costs.

8. Accelerated Capital Allowances:

  • Farmers can deduct the full cost of solar equipment from profits in the year of purchase under the Accelerated Capital Allowance scheme.

  • This option is valuable in high-profit years for an immediate tax write-off.

9. VAT (flat-rate farmers):

  • Flat-rate farmers can reclaim VAT on solar PV system purchases designated for farming.

  • The system must be listed on the Triple E Product Register, with claims made through the Revenue Commissioners VAT 58 form.

Optimising Returns and Future Outlook:

Investing in solar energy requires a comprehensive analysis of these factors to determine an accurate payback period. As solar technology advances and government support increases, the payback period is expected to become more favourable. This positions solar energy as an attractive option for environmentally conscious and economically savvy agricultural practices.

This article was first published in our 2024 Irish Farm Report.