Should Farmers Plant Solar Panels or Corn?

This is an updated version of an Ag Data News article from 2022. It includes updated prices and discussion of greenhouse gas emissions.

Source: https://www.clenera.com/news/cleneras-wapello-solar-project-reaches-commercial-operation

Corn occupies more land than any other crop in the US. A third of the corn harvest is used to make ethanol, which is an ingredient in the gasoline that powers our cars. Now that the transition to electric vehicles is in full swing, would that land be better used to generate electricity?

In 2021, Iowa's largest solar farm commenced operation (pictured above). According to regulatory filings, the Wapello Solar project occupies 1000 acres, 900 of which had previously been used to grow row crops such as corn and soybeans, and it generates 218,900 megawatt hours (MWh) of electricity per year. If all the electricity generated by these panels were used to power a Nissan Leaf, it could travel 900,000 miles per year per acre of lost cropland (see figure below).

If that land were instead used to grow corn for ethanol, it would propel a Nissan Sentra 13,458 miles per year per acre.

If we want to maximize car miles driven, then solar panels are 67 times better than corn. However, there are a lot of other uses of energy. Solar electricity could power homes rather than cars. Corn can produce calories for cattle rather than ethanol for cars.

What if we instead compare the two crops based on energy produced?

Solar panels generate 12 times as much energy per acre as corn kernels. The gap has closed for two reasons. First, internal combustion engines are about 3.5 times less energy efficient than electric motors. Second, the non-starch part of the corn kernel, which does not produce ethanol, contains energy and is fed to animals. So, corn doesn't look as bad when you consider total energy, rather than the miles a car gets out of it.

Yet, we still are not comparing like with like. You cannot feed electricity to people, cattle, or internal combustion engines. You also cannot feed corn to electric cars or air conditioners.

Dollars give us a consistent way to compare dissimilar products. How valuable is the energy generated by these two crops?

Solar panels generate about 13 times as much revenue per acre. For corn, I use the average price received by Iowa farmers in 2024 ($4.36 per bushel). For electricity, I use the average middle-of-the-day 2024 energy price at the Illinois MISO hub ($26 per MWh). Solar panels generate almost 7 times as much revenue as corn.

But, costs also matter. You can only make money on a crop if your revenue exceeds your costs. The Illinois crop budget published on farmdoc daily estimates non-land costs of $815 per acre for corn in 2024. A 100MW plant like Wapello cost about $155m to build and $2.16/MWh to operate in 2024, which translates to a levelized cost of $47 per MWh. Using these numbers, solar panels generate a big loss of $5,103 per acre, whereas corn produces a profit of $170 per acre.

So, why does any farmer install solar?

First, I am using cost numbers for solar from the National Renewable Energy Laboratory of the U.S. Department of Energy. It is possible that many solar projects have lower costs. The financial services company Lazard estimated in 2023 that the levelized cost of utility-scale solar projects ranged from $24 to $96 per MWh. I am using $47 per MWh, which is in the middle of this range. For profits to be positive, the levelized cost would need to be below the average price of $26 per MWh.

Second, and more importantly, I have not yet accounted for government incentives. The operators of solar farms are eligible for tax credits authorized in the Inflation Reduction Act. In 2024, they could reduce their capital costs by 30% through the investment tax credit or they could receive $27.50 in producer tax credits per MWh produced.

The motivation for these tax credits is that expanding solar energy production may offset production from dirty sources. Electricity generation from coal produces 1.05 metric tons of CO₂ per MWh, and natural gas generation produces 0.44 metric tons of CO₂ per MWh. At a social cost of carbon of $200 per ton, the climate benefit of offsetting a MWh of coal-generated electricity with solar is $51,030 per acre and for natural-gas-generated electricity it is $21,384. It would only require a $5,273 per acre subsidy to turn the loss on solar panels into the same profit as corn ($170).

Farmers do not receive direct subsidies for growing corn for ethanol (yet). Ethanol subsidies are applied further down the supply chain, so they are included in the corn price. Moreover, growing corn contributes to water pollution and greenhouse gas emissions. Accounting for these externalities implies that corn ethanol may not be any cleaner than gasoline.

As Jim Sallee pointed out in a recent blog, clean energy subsidies have significant drawbacks as a policy tool. They are difficult to calibrate correctly, they don’t encourage substitution across unsubsidized goods, and they don’t enable efficient greenhouse gas reductions across sectors. But, clean energy subsidies are what we currently have.

Incorporating the $27.50 per MWh producer tax credit for solar, which is worth more than the investment credit in this scenario, we see that solar panels are much more profitable than corn at current prices ($1580 vs $170 per acre).

So, should corn farmers convert all their land to solar?

If they were to do that, then they would flood the market with electricity and push its price down. A 25% decline in the electricity price ($6.50 per MWh) would push solar returns to zero. These corn profits are lower than average due to relatively low corn prices in 2024; profits reached a record high of about $660 in 2021 and will likely exceed 2024 levels in future years.

The United States used about 4 billion MWh of electricity in 2024. Generating that much electricity from solar farms would require only 20% of current corn acres. The realistic ceiling for solar generation is much lower than that. Thus, we should expect more cropland to be converted to solar panels, but don't expect it to make a big dent in corn acres. Also pushing against the mass conversion of farmland to solar are the "why not both?" potential of growing corn underneath and next to the solar panels, and the capacity to install solar panels on non-farmland.

Many agricultural interest groups oppose the use of farmland for solar, although that hardly makes them unique. It looks on the surface like solar panels are the better crop than corn because they produce vastly more energy and revenue per acre. However, once we account for costs, we see that solar panels are not profitable without government subsidies. These subsidies may be justified based on the potential for solar to offset fossil fuel generation, a potential that corn does not share.

I made the bar graphs using this R code. The figure below combines all the comparisons into one graph. This article is cross posted on the Energy Institute blog.