The Economics of Sharing an Acre

Drive past a utility-scale solar farm almost anywhere in North America and there is a reasonable chance you will see sheep. A flock keeps the grass down between rows of panels, which saves the site owner the cost of mowing, and the panels in turn give the animals shade and shelter. That simple arrangement, which has quietly become the most common form of what the industry calls agrivoltaics, is a useful starting point for thinking about a question that comes up as solar expands: what does it actually cost, and what does it actually pay, to use the same piece of land for two things at once?

What the acre is being asked to do

Agrivoltaics is the practice of producing electricity and agricultural output on the same ground. The term was coined in a 2011 pre-feasibility study by Dupraz and colleagues, who also proposed the metric most people still use to evaluate it: the land equivalent ratio, or LER (Dupraz et al., 2011). LER asks how much land you would need to produce the same amount of food and electricity if you kept the two activities separate. A value above one means the shared arrangement is more land-efficient than the sum of its parts. Dupraz’s original designs came between 1.35 and 1.7, and the systematic reviews published since then have broadly confirmed that range for well-designed systems (Kumar et al., 2025).

An LER of 1.6 sounds abstract until you translate it. It means that 100 acres run as a dual-use system produce roughly what 160 acres would if 80 were farmed conventionally and 80 were covered in conventional solar. Nobody gets 100 percent of both. A typical optimized layout yields something like 80 percent of the crop and 80 percent of the electricity that each activity would produce alone. The gain comes from the fact that the two shortfalls are smaller than the land saved.

The reason this matters to finance rather than just agronomy is that land is becoming the scarce input in solar development. Module prices keep falling. Bifacial panels dropped from around $0.18 per watt in 2024 to $0.15 in early 2026 (Mordor Intelligence, 2026). Financing costs and grid access, not hardware, are what now determine whether a project pencils, and in many jurisdictions the hardest part of grid access is finding a parcel near a substation where the local community will accept a solar farm. Farmland with a farmer still on it is easier to permit than farmland that has been taken out of production.

Where the extra cost goes

Sharing an acre is not free. Raising panels high enough for machinery to pass beneath them, spacing rows wider to let light through, and protecting cabling from animals all add to capital cost. The systematic review by Kumar and colleagues puts the premium at roughly 5 to 40 percent over conventional ground-mount solar, with the wide range reflecting how much depends on design (Kumar et al., 2025). A low-mounted system for grazing sits at the bottom of that range. An elevated four-meter structure that lets a combine harvester work underneath sits near the top.

The premium is paid on the solar side of the ledger, which is where most of the revenue is too. A solar project earns from electricity sales over 25 to 35 years under a power purchase agreement or in the wholesale market. The agricultural revenue on the same land is, in most cases, a small fraction of that. Therefore, the economic question is rarely whether farming income can justify a more expensive solar array on its own. It is whether the combination of modest farm revenue, lower operating cost, and easier permitting is worth the extra capital.

Operating cost is the easiest part to overlook. Vegetation management is a real line item for a solar operator, and the alternative to sheep is a crew with mowers and herbicide. Research at Western University in Ontario, published in early 2026, put numbers on this from the farmer’s side. The study modelled two grazing business models and found that solar grazing outperformed conventional sheep farming benchmarks, with returns on investment reaching the low 40 percent range in favourable scenarios, because the shepherd is paid twice: once for the lambs and once by the site owner for vegetation services (pv magazine, 2026). The same research group has argued that a wide buildout of solar grazing could add well over $100 million a year to the North American rural economy while displacing imported lamb (pv magazine, 2026).

Michigan State University Extension, writing in August, made a related point from the developer’s side. When solar developers estimate the economic impact of a project they routinely count indirect and induced effects through the supply chain and local spending. The agricultural activity on an agrivoltaic site carries the same kinds of multipliers, and developers rarely include them (Gould, 2026). That is partly a measurement problem, but it is also a sign that the industry has not yet fully worked out how to value the second use.

Grazing first, crops second

It is worth being clear about which version of agrivoltaics is actually being built. Pasture and grazing made up more than 80 percent of the global market by value in 2025 (Mordor Intelligence, 2026). Row crops and horticulture are the fast-growing segment, but from a small base, and for good reason. Sheep do not care much about panel geometry. Tomatoes and lettuce do. Grains and corn generally do not tolerate shade well at all, which limits the crop-based model to a narrower set of shade-tolerant produce, specialty berries, and vineyards.

That distinction matters for anyone trying to underwrite these projects. A grazing arrangement is close to a maintenance contract with a side benefit and can be priced as one. A horticultural arrangement asks the solar developer to take some view on crop economics, which is a different risk entirely, or to structure a lease that cleanly separates the two. Most developers have sensibly chosen the first path. Lightsource bp has built livestock integration into its standard site designs, and NextEra has been working with Midwestern row-crop farmers on wide-spaced layouts, but these remain the exceptions rather than the norm (Energy Solutions Intelligence, 2026).

Standards and lenders

A quieter development may end up mattering more than any individual project. The International Electrotechnical Commission is preparing a standard for agrivoltaic systems, IEC 63163, expected to be published in 2027, and market analysts anticipate that lenders will begin asking for compliance certificates in project finance (Mordor Intelligence, 2026). This is how emerging asset classes mature. Once a bank can point to a recognized standard for what counts as a properly designed dual-use system, the cost of due diligence falls and the range of institutions willing to lend widens.

Policy has moved in the same direction. In 2025 the European Commission, for the first time, described solar generation as a complementary tool for agriculture in its Vision for Agriculture and Food strategy, framing it explicitly as a source of additional farm revenue rather than a competitor for land (EnergyTransition.org, 2025). France has had a legal definition of agrivoltaics in its planning rules since 2024. In the United States, Massachusetts has offered a dual-use incentive under its SMART program since 2018, and several other states are running pilots.

Keeping the numbers honest

Enthusiasm for the concept has occasionally run ahead of the evidence, so a few cautions are in order.

The most widely cited headline figure comes from a January 2026 review in Renewable and Sustainable Energy Reviews, which estimated that agrivoltaics deployed across crops shown to benefit from partial shade could generate over one trillion dollars in additional global agricultural income (Ahmed et al., 2026). That is a maximum potential scenario, calculated by applying observed yield gains across every suitable hectare in every suitable country. It is a useful indication of scale, not a forecast.

The Western University returns are similarly best read as what a well-run operation can achieve in a good year rather than what an average one will. The auction-based grazing model with the highest return is also the one most exposed to livestock price swings, as the authors themselves note.

And the capital premium, while modest on paper, lands on the part of the project that faces the highest hurdle rate. A 20 percent increase in structure cost on a utility-scale array is not trivial when the array’s revenue is contracted for decades at a fixed price. The projects that work tend to be the ones where the second use was designed in from the start rather than added afterward.

None of that undermines the basic case. The reason agrivoltaics has moved from research plots to standard practice for sheep, and from standard practice toward a recognized standard, is that on the right site the arithmetic is simple. The land was going to be used for solar anyway. Letting it keep producing something else, at a cost that is small relative to the project and a benefit that is large relative to the farm, is one of the less complicated good ideas in clean energy.

References

Ahmed, S., et al. (2026). Agrivoltaics as a systems innovation: Multi-dimensional benefits from global studies across climate, agriculture, energy, and ecosystems. Renewable and Sustainable Energy Reviews, 230. https://www.sciencedirect.com/science/article/pii/S1364032126000201

Dupraz, C., Marrou, H., Talbot, G., Dufour, L., Nogier, A., & Ferard, Y. (2011). Combining solar photovoltaic panels and food crops for optimising land use: Towards new agrivoltaic schemes. Renewable Energy, 36(10), 2725-2732.

Energy Solutions Intelligence. (2026, July 15). Agrivoltaics 2026: Farming and solar dual income. https://energy-solutions.co/articles/sub/agrivoltaics-farming-solar-dual-income

EnergyTransition.org. (2025, October 28). Agrivoltaics: Double the farming on a global scale. https://energytransition.org/2025/10/agrivoltaics-double-the-farming-on-a-global-scale/

Gould, M. C. (2026, August 19). Agrivoltaics as a rural economic engine in Michigan. Michigan State University Extension. https://www.canr.msu.edu/news/agrivoltaics-as-a-rural-economic-engine-in-michigan

Kumar, M., et al. (2025). A systematic review of agrivoltaics: Productivity, profitability, and environmental co-benefits. Sustainable Production and Consumption. https://www.sciencedirect.com/science/article/pii/S2352550925000569

Mordor Intelligence. (2026, May 19). Agrivoltaics market size, share and 2031 growth trends report. https://www.mordorintelligence.com/industry-reports/agrivoltaics-market

pv magazine. (2026, March 26). Solar sheep grazing delivers margins up to 40% in new study. https://www.pv-magazine.com/2026/03/26/solar-sheep-grazing-delivers-margins-up-to-40-in-new-study/