Solar Farm Business Plan
While a solar farm is an excellent business to start, it does have a few unique aspects that you’ll need to consider. But like any other business, if you’re looking to attract investors or lenders, it’s essential to show you’ve done your research and come up with a viable business. That’s why you need a solid solar farm business plan before you move forward, especially if you need to get outside funding to make your dream a reality.
Whether the idea of harnessing solar energy is a clear concept or a foreign thing to you, most people share the basic understanding that solar panels attract the sun’s energy and convert it to a usable power source. It’s common to find solar panels on rooftops generating power for use in homes, though solar can be used to power a great deal more.
A solar farm is a bigger version of home solar panels, intended to power broader energy needs. A solar farm is designed to provide electricity to thousands of homes and businesses.
Composed of hundreds of silicon panels embedded with photovoltaic cells, an average solar farm can spread across 2.5 acres of land. In this space, the farm can receive enough high-intensity sun to generate up to one megawatt of electricity. That is one million watts — enough to power 650 residential homes for a day.
This post will review what you need to include and explore when writing a solar farm business plan.
Why You Need a Plan
It may surprise you to know that the solar farm industry in the U.S. is a $10 billion dollar market. Additionally, the industry also has an estimated growth rate of 46.5 percent. Currently, in the U.S., there are only around 80 registered and licensed solar farm developer businesses. Because of these statistics, this industry has become most lucrative for those desirous of setting up a solar farm.
While the solar farm business is hugely attractive, it also has nuances that non-energy business types don’t have to consider. The alternative energy sector has unique financing opportunities and hurdles. It also comes with unique regulatory compliances and access to the right experts to ensure equipment and infrastructure are setups correctly.
Putting together a solar farm business plan not only helps in figuring these out components, but it also helps in attracting investment funding for it. By making a business plan, you reduce everything to writing so that it’s unlikely your plan will miss out on any important aspect.
What to Include
Like any other business plan, a solar farm business plan should address all of the key information an investor or lender would want to know before making a decision.
I recommend including the following features:
#1 Executive Summary
In this section, provide a brief overview of each section of the business plan. Highlight the information sought by the intended readers of the plan — namely your bankers, investors, and even potential customers. You may need to tweak this summary to cater to different audiences if you plan on presenting to multiple people.
#2 Company and Financing Summary
Provide an outline of your firm, along with your mission statement and a summary of your operations. This also includes the financials.
Registered Name and Corporate Structure
Provide the name of your company, address, its geographical location, and the competitive advantages of the location. Describe your company’s organizational structure and spell out what needs your company will fulfill. Also, discuss industry trends that back up the feasibility of setting up a solar farm.
Mention how much investment is required for your solar farm. Provide the breakdown of these funds. For example, initial lease payments and deposits, working capital, leasehold improvements, security deposits, marketing budget, opening supplies, etc.
Investor and Management Equities
Disclose what percentage of interest you are willing to sell to the investor in exchange for the funds invested. Also, mention your offer to include the investor as one of the board of directors and what percentage of majority ownership you will retain once you raise the required capital.
#3 Products and Services Overview
This section provides an overview of products and services and includes the following parts:
Describe the geopolitical environment that will help in increasing the rates of your alternative energy. Mention the likely competition you will face in your business operations.
Compare the price of oil and other fossil fuels to that of alternative energy sources. Stress the fact that alternative energy sources, such as solar energy, are cheaper and expected to grow significantly. Mention the statistics of companies providing non-nuclear and non-fossil fuel power generation to the general public.
Describe the two main customers for solar power — mainly government agencies and electricity wholesalers. Mention the eagerness of counties, state governments, and the U.S. federal government in obtaining large scale electricity delivery contracts from you for its large-scale applications.
In the present scenario, solar energy providers are few and far between and do not provide much competition for each other. However, once the popularity of solar energy picks up, you will need to work towards obtaining a competitive edge by maintaining a low-cost operating infrastructure. You can compare the price, reliability, and scalability of the electricity generated by your solar farm with other alternative energy providers.
#4 Marketing Plan
If you plan to sell the solar energy from your farm directly to the electrical grid, it will require minimal marketing. However, for selling it to established utility companies and large businesses, you will need to become visible online by developing your own website and by establishing strong relationships with the businesses you’re hoping to partner with.
Your marketing strategy should highlight the benefits of solar energy through public relations campaigns. Make the public aware of the unique benefits of solar produced electricity — beyond the benefits of zero emissions. Your business will directly benefit from advantages in terms of rebates, tax credits, and other incentives.
Since the price is an overriding factor, also describe the pricing of your services and products.
Make a mention of marketing analysis where you evaluate your competitors, like other solar farms, tidal power plants, etc. Highlight the benefits of solar energy over conventional energy providers, like coal.
#5 Financial Plan
The solar farm business plan financial analysis includes projected financial statements and ratio analysis. Since solar farms high initial capital costs for equipment and set up, discuss the potential funding sources you are considering, like government grants, bank loans, and even future stock offerings.
#6 Personnel Plan
In this section, provide an organizational chart that shows the management hierarchy. Also, present your brief professional biography and that of your managerial team. Give details about the manpower that will be engaged in the solar farm. It will be in your interest to keep your workforce small by using third-parties for installation, maintenance, and upkeep of the solar farm since this will project a positive picture to your investors.
#7 Sales Forecast and Expansion Plan
Mention your sales forecast for the next three to five years that shows a strong initial rate of growth that will lead to the rapid expansion of your business during this period. Your sales forecast should project metrics, such as sales, operating costs, EBITDA, taxes, interest and depreciation, and net profit. Also, describe your efforts to aggressively solicit additional capital to reinvest in new photovoltaic cell structures.
#8 SWOT Analysis
To prove the viability of your solar farm business in the intended geographical location, it is important to mention the results of SWOT analysis in your business plan. This will highlight the strengths, weaknesses, opportunities, and threats of your business plan. Depending on the ground realities, describe these features individually:
- Strengths: Discuss the internal strengths and experience of your team and any assets you currently possess. If you already have land secured, mention the size and location of the solar farm. Mention the competence and dedication of your core team and workforce for installation, maintenance, and repair of solar panels.
- Weaknesses: Here you need to highlight the unique internal hurdles you may encounter in establishing the solar farms, such as the lack of adequate finances to promote your business or lack of team members with previous entrepreneur experience.
- Opportunities: Explain how the market opportunities are going to bring an advantage to your new solar farm. Any positive impacts from government regulations, new tax incentives, and financing programs would be great environmental opportunities that will help your business thrive.
- Threats: One major external threat envisaged is that of an economic downturn that will affect your purchasing and spending power. Another is the establishment of another solar farm in your vicinity that threatens to take your business away.
Overall, a solar farm brings great benefits to the business owner and to users of its energy. It is a sustainable business to launch and many investors and financing institutions specialize in supporting alternative energy. For these reasons, the timing is perfect for new entrants looking for a profitable and ethical business to launch in the solar farm space. Having a well-executed solar farm business plan is the first step to moving closer to the reality of running your very own solar farm.
If you need support creating your solar farm business plan for strategy or funding, Written Success is here to help. Request a free consult with Ashley to learn more about the services that will help you reach your goals.