How Can I Get Funding for Solar Panels on My Farm?

Did you know that the U.S. Department of Agriculture (USDA) offers financial assistance to fund photovoltaic energy projects on your farm or ranch? Solar panels can increase your operation’s profitability. One government grant program for solar panels on farms is called the Rural Energy for America Program (REAP).

In this post, our FarmRaise team will cover:

• Why solar energy may be a good fit for your farmers and ranchers
• Types of solar panel ownership
• Tips and funding opportunities for solar projects on your farm

But first, what’s this about “photovoltaic” initiatives? A photovoltaic system (PV system) is a more scientific word for the typical solar panel (or PV module) system we think of when we say “solar energy.”

Benefits of Solar Energy for Agricultural Producers

The USDA wants to incentivize farmers to make the upgrade toward more renewable energy systems. That’s apparent by their investment in sustainability climate smart agriculture projects. But aside from government incentives, which we’ll talk about throughout this article, there are a lot of benefits for rethinking your energy use.

Solar panels can reduce your electric bill and reliance on nonrenewable energy. You can use the energy produced by your solar system in the place of electricity from the grid, and any surplus energy can be sole through solar energy programs.

There’s more you can do with solar panels that generate energy. Ever heard of agrovoltaics? It basically means using your land for both solar panels and for agricultural purposes. Here’s an example: Once you install your panels, you can plant shade crops under them. And studies have shown that it’s an effective way to address drought and water loss since solar panels can reduce the amount of evaporation of your irrigation water.

Tax Credits for Solar Installation

Every year the government decides how much tax credit you might receive for installing solar panels on your commercial farm or ranch. If your farm isn’t a commercial farm (growing at your home for your own sustenance with less than $1,000 per year in sales) then you’ll need to take a look at homeowner’s tax credits.

For commercial farmers and ranchers, you may be eligible for a tax credit of 30 percent of the installation costs on your federal corporate income taxes. But it’s important to note that you only get that credit for the year you install the PV system. However, you can still write off the cost of depreciation after your installation year.

When it comes to taxes, make sure you’re tracking all of your costs, inventory, receipts and other financial data. Check out our guide to agricultural taxes for tax-filing tips for farmers. You can also check out FarmRaise Tracks, a tool we made just for farmers so they can organize all of their financial info by Schedule F categories. It’s also one of the most affordable farm finance tracking tools out there.

Demo FarmRaise Tracks for free and also receive access to the Farm Funding Library

How to Get Started with Solar Panels on Your Farm

Get An Energy Audit

An energy audit is crucial for a farmer looking to install solar panels. Here’s why. It helps you understanding your current energy usage patterns so you can identify areas for energy efficiency improvements. Then you’ll be able to determine the appropriate size and capacity of the solar panel system needed. An energy audit can also highlight potential cost savings through energy efficiency improvements. Who doesn’t want to know the return on investment (ROI) of a new project? You want to know if the panels are improving your operation or draining it. An energy audit will estimate energy savings and the payback period before you even instal them.

So how do you go about getting an audit?

1. Hire a pro: They will assess energy usage on the farm. To find a professional, you can contact local energy agencies (state energy offices or regional energy efficiency programs) or USDA Rural Development Offices which may be able to offer you recommendations. The auditor will conduct an on-site assessment which includes examining equipment, systems, and operations, inefficiencies and potential areas for improvement.
2. Gather a year’s worth of utility bills: This will help you analyze your energy consumption patterns over different seasons and operations.‍
3. Analysis and recommendations: The auditor will provide a detailed report of their finding and offer recommendations for energy efficiency improvements. They should then suggested the size and type of solar panel system suitable for the farm's needs.‍
4. Get to work: Take those recommendations and make them happen! That might mean upgrading equipment, improving insulation or adjusting operational practices, before or alongside the solar panel installation.

And just FYI, if you’re not installing panels through the REAP program, you may be able to use a Technical Service Provider (TSP) which is available through certain USDA Natural Resources Conservation Service programs like EQIP.

Two Types of Solar Panel Ownership

Now that you know how solar might have a positive impact on your farm finances, you can start considering how you go about your clean energy journey. Here’s something to consider, though. You may be reducing your energy costs, but solar panels can be a significant financial investment initially. So how can a rural small business get financial assistance to make the switch possible?

There are two ways to think about installing panels: Direct ownership or third-party ownership.

If you opt for third-party ownership, you’ll work with a solar company or group of investors to get panels installed on your land. However, the panels aren’t yours so the company or group will get the tax credits or any federal funding. You’ll also pay them for electricity produced by the solar system. Third-party ownership isn’t available in every U.S. state and island, so you’d also need to check if it’s available in your locality. The upside: you probably won’t pay a dime for installation or operation.

With direct ownership, you own the panels, the energy that comes from them, and you’ll be able to take advantage of the tax incentives and government funding programs.

What is the Rural Energy for America Program (REAP)?

REAP is a USDA program that gives farmers offers loans (at low interest) and grants (free money) to install renewable energy or make energy efficiency improvements on their farm or ranch. You can get up to $500,000 for installing things like:

• Solar panels
• Wind turbines
• Biomass
• Hydropower
• Geothermal energy

If you prefer focusing on energy efficiency improvements, you can get up to $250,000 for eligible project costs such as:

• HVAC
• More efficient insulation
• Lighting
• Cooling or refrigeration units
• Doors and windows
• Switching from a diesel to electric irrigation motor
• or replacing energy inefficient equipment (like grain dryers).

While this is pretty exciting, it’s important to note that a REAP grant will only cover 25 percent of your costs while a REAP loan guarantees up to 75 percent of the project cost. This program is an example of a cost share where if your project costs $10,000, they will only fund 25 percent (or $2,500). That means you must be prepared to pay for 75 percent of the costs (or in this scenario $7,500).

You should also note that REAP is considered taxable income so it’s not likely that you’d receive your that tax credit for installation. It’s something to keep in mind since these projects can be quite expensive.

Am I Eligible for REAP?

REAP requires that either you:

• Make 50 percent of your gross income off of your agricultural operation
• or that you’re a small business in an eligible rural area.

If you meet one of these two criteria, then you’re most likely eligible! You can also take our eligibility quiz to see what types of funding you may be available for.

SEE IF YOU’RE ELIGIBLE FOR FUNDING

Maximize Your REAP Grant Application Success

Embarking on the journey to secure a grant like the Rural Energy for America Program (REAP) requires systematic organization and accurate financial documentation. That's where FarmRaise Tracks becomes your indispensable ally. Our user-friendly app empowers you to effortlessly track every farm transaction, allowing you to seamlessly categorize and store all your expenses with just a few taps on your device.

When it comes to REAP grant applications, precise financial records are essential. FarmRaise Tracks ensures that you have a comprehensive, well-organized record of your expenditures, a crucial aspect for demonstrating eligibility and maximizing your chances of success. Our app simplifies the often daunting task of compiling financial data, streamlining the application process and helping you present a compelling case for your project's funding needs.

Don't let the paperwork overwhelm you. FarmRaise Tracks not only makes financial tracking a breeze but also positions you for success in securing grants like REAP by providing the essential documentation and organization required for a standout application. Elevate your grant application experience with FarmRaise Tracks today!

Application Support and Alternative Funding

If you’re looking to fund and install solar panels on your farm, making energy efficient improvements can boost your profitability. REAP grants that help you switch to solar power can seem complicated and time consuming. Additionally, applications are narrative based, making them writing and time intensive.

FarmRaise Premium members can access grant writing assistance by connecting with a grant writer through our platform. Whether you choose to collaborate with a grant writer or tackle the process independently, our Farmer Success Advisors are ready to offer support and guidance as part of your FarmRaise Premium benefits.

If you evaluate that solar panels aren’t right for your operation at the moment, there are a lot of other funding opportunities out there that can help you adopt climate-smart practices. Check out the top five federal funding opportunities and see if there are any that might fit your operation.

You can also find these, and many more, programs in the FarmRaise Funding Library which you can check out for free.