How Much Does a Solar Farm Cost in August 2024? (2024)

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.
• 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 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.

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 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.

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.

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 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 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.

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.