I have Lots of Land. Should I Go for a Solar Power Plant on This Land? – Ask Solar Mango

Sweet Answer from Solar Mango: (updated Jul 2015)

This is one of the most popular questions that have been asked to Solar Mango.

The short answer is as follows: Owning land should not be the most important reason for you to go for a solar power plant.

The long answer is as follows:

  1. The cost of land is only a small percentage of the overall costs of a solar power plant. As a result, even if you do not own land, you can purchase land elsewhere and construct a solar power plant. Ownership of land thus provides you with no competitive advantage
  2. What is more important than land ownership is the model through which you plan to generate revenues from your power plant for 25 long years. What is critical for a solar power project is that you have a clear business model and a power purchase agreement with a financially healthy offtaker. Without these, there is no business case for you to put a solar power plant, land or no land.
  3. Assuming you have tied together a good business model and a financially healthy offtaker for the power you generate, the land you own might still not be suited for a solar power plant if it is not located in the right region or if it is too far away from an evacuation substation.
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Therefore, as a solar investment opportunity, large-scale solar power plants require significant capital investments, with cost of land being only a small percentage of this. What is critical is that you require a healthy return on your investment and ownership of land is hardly a differentiator for or contributing factor to returns.All the above only go to show that ownership of land should not be an important criteria for your decision to invest in a solar power plant.

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