Farm Solar Financing Options | How to Pay for Agricultural Solar
Understanding your farm solar financing options is the first step once you've decided solar power makes sense for your agricultural operation. You’re sold on the benefits.
The cost savings, the clean energy, and the protection from rising utility rates. Now the real question is how you pay for it.
This article breaks down the most common ways farming businesses finance solar, including a bonus program that many agricultural operations overlook.
Farm Solar Financing Options: What's Available to You
You get it. You’re bought into and believe the benefits of transitioning your farm from traditional power sources to solar power. How could you not? With the cost savings alone, solar-powered farms are very attractive. But, like all things in life (and business), affording the attractive agricultural solar solution is very different than simply wanting it.
Reviewing common solar power misconceptions helps address financial hesitation.
If you’re interested in what it looks like to bring solar to your farming operation, likely the first and biggest question on your or your accountant’s mind is how you’ll pay for the initial set up and installation.
Cash Purchase
Cash PurchaseYour first option is to make a cash purchase. This is the most direct and arguably the most beneficial for your ROI. Analyzing solar efficiency versus ROI demonstrates why an upfront purchase yields the highest long-term returns.
With a one-time, upfront purchase you’ll be eligible to take advantage of federal tax credits for 30% of the system’s cost. You can also qualify for any state or local rebates and initiatives in your area.
Aside from the tax benefits, you could be eligible to depreciate the costs because, just like your traditional farming equipment, solar power is considered a capital expense. Understanding how solar panels are manufactured highlights the durability of this asset.
Many farmers have chosen to finance their solar systems through third-party loans. Farm credit bureaus and local banks often offer low-interest loans that are more cost-effective than other financing options we share.
Making a substantial cash purchase requires a lot of consideration. If you have any questions about how solar power works on farms or for real-life examples of farmers who have made the jump and are reaping the rewards, contact us!
A cash purchase is the most direct financing option and typically delivers the best return on investment. You pay the full cost of the solar system upfront, and the system is yours outright from day one.
No interest — A cash purchase means no loan term, no origination fees, no variable interest rates, and no interest paid over time. Your operating expenses stay predictable.
A Power Purchase Agreement (PPA)
A Power Purchase Agreement (PPA) is a financing arrangement where a solar developer or solar company installs and owns the solar panels on your property.
If purchasing your system out-right through a traditional cash purchase isn’t a viable option for you, you could consider financing and operating solar power through a Power Purchase Agreement (PPA).
In a PPA, your land or facility acts as the host for the system but do you do not own it outright. Instead, you pay only for the electricity that you draw from the system – usually at a lower rate than traditional electric companies.
The benefits of a PPA are that it requires little to no upfront cost, and the maintenance of the system is not your responsibility. While the cost of the energy will be higher than if you purchased the system outright, the cost-savings vs. traditional energy is still considerable.
It’s also important to consider that in this option, you will not be eligible for any direct or in-direct federal, state, or local tax benefits, including depreciation.
Solar leases work similarly to PPAs — you pay a fixed monthly amount to use the system rather than paying per kilowatt hour of electricity generated. Both are forms of financing solar without ownership.
PPAs and solar leases make sense when upfront capital is limited or when the tax benefits don't apply to your business structure. For agricultural operations with strong tax liability, a cash purchase or loan typically delivers better long-term value.
Solar Loans
Many farmers finance their solar system through a third-party loan. Farm credit bureaus and local banks often offer competitive interest rates specifically for renewable energy projects and energy efficiency improvements, in many cases more favorable than general commercial loan products.
A few things to know about solar loans:
You own the system outright, so you keep all tax benefits, including federal tax credits and accelerated depreciation.
Loan terms vary, but most solar financing loans run 10 to 25 years. A longer loan term lowers your monthly payment but increases total interest paid.
Fixed rate loans give you predictable payments over the life of the loan. Variable interest rates carry more risk if rates rise.
Interest rates depend on your credit profile, project size, and lender. Rural small businesses and agricultural operations may qualify for lower interest rates through USDA loan programs.
Watch for origination fees and other costs that add to the total project costs.
For rural areas, the USDA Business & Industry (B&I) Loan Guarantee Program provides loan guarantees for renewable energy systems and renewable energy projects. Loan guarantees reduce lender risk, which can result in lower interest rates and larger loan amounts than you'd get through a standard commercial loan.
Before starting a loan application, it helps to do an energy audit of your operation. Knowing your actual energy usage makes it easier to determine the right system size and justify the project cost to lenders.
Bonus: The REAP Program
One last, very important thing to consider when reviewing your financing options is the Rural Energy for America Program (REAP). It is one of the most valuable and underused funding sources available to agricultural operations considering solar.
REAP is grant funding provided by the USDA, offering agriculture enterprises and small rural businesses a chance to offset up to 25% of the cost of going solar. There are two submission times during the year. Here's what it covers:
Grants that offset up to 25% of total project costs for eligible renewable energy projects.
Loan guarantees for up to 75% of project cost, which helps secure financing at lower interest rates than you might otherwise qualify for.
Combined funding — you can apply for both a grant and a loan guarantee for the same solar project, potentially covering a large portion of your total project costs.
REAP has two submission windows per year. Missing one means waiting several months for the next cycle, so plan ahead during your project development process.
To find out whether your operation qualifies and to understand how REAP interacts with other federal incentives, such as the Inflation Reduction Act tax credits, contact your state's USDA Rural Development Energy Coordinator or visit www.dsireusa.org.
How to Choose the Right Financing Option For Your Farm Solar Installation
The right path depends on your tax situation, available capital, and how long you plan to operate at your current property.
If you have capital and a strong tax liability, a cash purchase maximizes your return and keeps total project costs lowest over time.
If you want to own the system but spread out payments, a solar loan with competitive interest rates lets you preserve capital while still capturing tax benefits.
If upfront cost is a barrier, a PPA or solar lease gets solar on your property with no money down, though you give up ownership and the associated incentives.
If your operation is in a rural area, REAP should be part of the conversation regardless of which financing path you choose. It can significantly reduce your net project cost.
Before committing to any financing option, speak with a tax advisor who understands renewable energy investments and can help you determine how federal incentives, state incentives, and depreciation interact with your specific tax situation.
You can check our solar farm questions for clarification.
Ready to Proceed?
Contact TerraSol for a free consultation. We'll walk you through what a solar installation would look like for your operation, what it would cost, and which farm solar financing options make the most sense given your goals.
