Tobacco farmers who want to increase their profits might want to consider harvesting sunlight instead, a new analysis published in Land Use Policy shows.
Michigan Technological University researchers analyzed tobacco farms in North Carolina to determine the point at which farmers could make more money pivoting from the cash crop to renewable energy. The researchers selected North Carolina because it is a major tobacco-producing state with high solar potential.
They factored in variables such as the decreasing price of solar panels and increasing value of electricity and compared them against the decreasing popularity of smoking and anticipated decline in price paid to farmers for tobacco.
An unexpected finding
While the researchers expected to find that solar profits would outpace those from tobacco at some point in the future, the analysis indicated that solar is already the more profitable choice. The researchers also noted solar panels are the more durable choice – unlike plants, panels can withstand unstable climate conditions such as extreme heat, cold, wind and rain.
“We looked at likely trends in all of the major economic factors, but were surprised to find that because the cost of solar has dropped so dramatically, it is already economically advantageous for tobacco farmers to replace tobacco with solar in many situations,” said researcher Joshua Pearce, professor of materials science and electrical engineering at Michigan Tech.
For an average 100-acre tobacco farm, Pearce said the profit potential from converting to solar could be significant.
“We did account for installation costs and looked at the overall economic life cycle of the project – and the overall actual profit ranged up to thousands of dollars per acre per year – so hundreds of thousands of dollars per year for a 100-acre farm,” he said. “The profit potential is very dependent on the situation at a given farm.”
Tobacco farmers who want to calculate their farm’s profit potential can do so by referencing Pearce’s study here. Pearce added the recently imposed solar panel tariff could threaten to reduce these profits but should not wipe them out entirely.
“It will still be profitable – although in some cases it will not be the overwhelming slam dunk from even a few months ago,” he said. “Farmers wanting to take advantage should analyze their own opportunities and move quickly.”
Pearce and his colleagues found that if every tobacco farm in North Carolina converted to solar energy production, collectively they could generate up to 30 gigawatts – equivalent to the state’s peak load in the summer.
Beyond increasing revenue, farmers would also be shifting from a product that decreases public health and causes pre-mature deaths to one that benefits both public health and the environment.
“The economic benefits for ex-tobacco farmers going into solar is nice,” Pearce said, “but the real payoff is in American lives saved from both pollution prevention and smoking cessation.”
The cost of converting
One of the primary factors that could keep farmers from making the switch from tobacco to energy farming is the initial cost to install a solar system, according to the researchers. For example, a 10-megawatt solar farm priced at $1 per watt would cost $10 million to install.
Pearce argues state governments should consider implementing policies that would incentivize tobacco farmers to convert to solar, such as offering low- or no-interest loans. As it stands now, solar developers are offering to lease land from farmers – which allows them to make money with little risk – but it also means the bulk of the profits go to the developers.
“Not so long ago, governments paid farmers to grow tobacco,” Pearce said. “When that stopped the number of tobacco farms in N.C. dropped rapidly. Now they could do the same thing and pay a bonus for solar installs to accelerate the trend that is bringing jobs, lower cost electricity, reduced pollution and economic benefits to communities.”
Alex Crees is a writer covering issues related to energy, the environment and politics. Her work has appeared in Fox News and Prevention. Alex earned a bachelor’s degree in journalism from New York University.