The cost of installing solar panels on the roofs of agricultural buildings has fallen significantly in recent years. Agricultural buildings such as grain stores, dairy units, refrigeration warehouses and chicken housing all use vast amounts of energy and this means electricity bills are a large operational costs for UK farmers. Business energy prices have risen by 30% in the last 5 years and in April 2017, the big 6 energy suppliers were set to increase their prices by another 5-10%. This means farmers would be paying around 14 pence per unit of electricity to purchase it from the National Grid.
This compares to paying what is effectivity just 4.2p/unit with solar energy. With the price of solar PV installation costs at its lowest in 2017, UK farmers who have already invested are seeing an ROI of 11-16%. This is despite the FiT subsidy cuts early last year. Average payback length is 6-8 years and your solar investment can be cash flow positive in as little as 2 years. With low interest rates solar is therefore viewed as a low risk investment particularly for a long term businesses such those in the agricultural sector.
A 50kw agricultural solar installation using 75% of the generation on site, can expect a projected first year income and savings in excess of £7,250, giving a first year return on capital of 14.5% before indexation. Any unused energy can be sold back to the National grid.
Solar power is classed as plant and machinery and can be eligible for capital allowances. i.e for the capital cost to be written off against profits in the first year. In the case of a farming partnership paying 40% tax they can often claim back from HMRC 40% of the cost of the solar installation in the next tax returns. This can mean a £50,000 investment effectively costs the business just £30,000 making the first year return on capital significantly higher and the cost of production of the electricity significantly lower at around 2 p / unit.
Retailers are asking more and more of farmers and they often have to prove their suppliers are helping them reduce their carbon footprint. Solar panels can help seriously reduce CO2 emissions and demonstrate a commitment to sustainable policies. Reducing CO2 emissions has helped many businesses win new lucrative contracts as retailers look for more than just cheap prices.
Generating your own clean energy is the future. Solar PV helps farmers keep overheads low and sustains profit margins when they are constantly under pressure from the retailers.
For information about installing solar panels on commercial building, check out one of our previous posts.