Economic Implications of Agricultural Land Conversion to Solar Power Production

Meeting greenhouse gas (GHG) reduction targets will require a significant increase in electricity production from sustainable and renewable sources such as solar energy. Farmers have recognized this need as a chance to increase the profitability of their farms by allocating farmland to solar power p...

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Published inEnergies (Basel) Vol. 14; no. 19; p. 6063
Main Authors Farja, Yanay, Maciejczak, Mariusz
Format Journal Article
LanguageEnglish
Published Basel MDPI AG 01.10.2021
Subjects
agricultural land
Agricultural production
Agriculture
Alternative energy sources
Decision making
Economic justification
Efficiency
Electricity distribution
Electricity generation
Emissions
Energy industry
Feasibility studies
Food
greenhouse gas emissions
Industrial plant emissions
landscape
profit maximization
renewable energy production
Renewable resources
social welfare
Solar energy
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Summary:Meeting greenhouse gas (GHG) reduction targets will require a significant increase in electricity production from sustainable and renewable sources such as solar energy. Farmers have recognized this need as a chance to increase the profitability of their farms by allocating farmland to solar power production. However, the shift from agriculture to power production has many tradeoffs, arising primarily from alternative land uses and other means of production. This paper models the farmers’ decision as a constrained profit maximization problem, subject to the amount of land owned by the farmers, who have to allocate it between agriculture and solar power fields, while considering factors affecting production costs. The farmers’ problem is nested in the social welfare maximization problem, which includes additional factors such as ecological and aesthetical values of the competing land uses. Empirical analysis using data from a solar field operating in Israel shows that landowners will choose to have solar power production on their land unless agricultural production generates an unusually high net income. Adding the values of non-market services provided by agricultural land does not change this result. The consideration of the reduction in GHG emissions further increases the social welfare from solar fields.
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content type line 14
ISSN:1996-1073
1996-1073
DOI:10.3390/en14196063