The Inflation Reduction Act unleashed a boondoggle of subsidies and tax breaks for wind and solar developers in 2022. Initial cost estimates over the first ten years of the law were $369 billion, but have since grown to about $1.2 trillion. By 2050, the Cato Institute estimates that IRA subsidies might reach $2 to $4 trillion.
Isaac Orr and Mitch Rolling, of Always On Energy Research, have calculated the cost of solar farms’ tax breaks and subsidies—and it amounts to $56,325 per acre. Subsidies amount to $2,253 per acre per year throughout the projected useful 25-year lifetime of solar panels. This is based on the assumption that a utility-scale solar facility requires eight acres of land per megawatt and developers see average costs of $1.5 million per MW, of which 30% is returned as a tax credit.
These estimates are fairly conservative. In real-world conditions, parts of solar panels, like inverters, often last less than 25 years and require repowering. Developers also receive at least 30% of their capital costs back from the Investment Tax Credit, but sometimes more depending on the characteristics of the project.
In the West, where large swaths of land are federally owned, the government may make direct leasing decisions to support solar and wind developments over other multiple uses of land. The Bureau of Land Management finalized its Western Solar Plan, which designates 31 million acres of federal lands in 11 Western states for consideration of utility-scale solar projects of five megawatts or larger. Five additional states (Idaho, Montana, Oregon, Washington, and Wyoming) and nine million additional acres are opened for solar development compared to the original rule.
It’s hard to resist the slew of tax dollars earmarked for solar power even in states with more privately-owned land. In the Midwest, as Orr and Rolling note, “loss of property values, visual blight, and the loss of productive farmland” are all serious concerns with solar panel proliferation. Land is cheaper in the Midwest, transmission is plentiful, and wide fields of land are available.
The only problem is that solar panels are competing with prime agricultural land—and solar is winning. A Reuters report in April describes the incentives clearly:
Solar leases in Indiana and surrounding states can offer $900 to $1,500 an acre per year in land rents, with annual rate increases, according to a Reuters review of solar leases and interviews with four solar project developers. In comparison, farmland rent in top corn and soybean producers Indiana, Illinois and Iowa averaged about $251 per acre in 2023, USDA data shows…
Some agricultural economists and agronomists counter that taking even small amounts of the best cropland out of production for solar development and damaging valuable topsoil impacts future crop potential in the United States.
Common solar farm construction practices, including clearing and grading large sections of land, also can lead to significant erosion and major runoff of sediment into waterways without proper remediation, according to the U.S. Environmental Protection Agency and the Justice Department.
Solar energy is having a rough 2024. SunPower, the nation’s largest solar panel installer, filed for Chapter 11 bankruptcy over the summer. One customer lamented his purchase in Business Insider, calling it a “huge mistake.”
The true cost of residential solar panel installation, before subsidies and tax breaks, averages about $12,700 and ranges up to $30,500. Solar energy has the lowest capacity factor (in other words, how much electricity a power plant actually produces compared to its maximum possible output) of any energy source, at only 24.6%. It’s no wonder tech companies that need 24/7 reliable electricity for data centers are trading wind and solar for nuclear energy.
Given the incentives at play, it’s understandable that farmers would agree to have acreage leased for solar development instead of purchasing feed and equipment for meager returns. But it’d be a shame if the federal government’s picking of solar-energy winners leads “even more acres of American farmland to go from under the plow to under the panel.”