August 10, 2026
Conversations about the economics of an agrivoltaics project come with their own vocabulary. And whether a project makes financial sense depends on a number of factors. In this post, we focus on 10 common terms related to evaluating the economic feasibility of agrivoltaics – building on our previous posts on common agrivoltaics terms related to light, climate and water and system design considerations.
Incentives
Incentives are programs that reduce the cost of building or operating a solar project, including tax credits, grants, rebates, and payments tied to performance.
Incentives can meaningfully impact an agrivoltaics project’s economics, but they change frequently. Confirming what incentives are currently available is one of the first steps in evaluating economic feasibility of a project.
Examples that have applied to some past agrivoltaics projects include the federal Investment Tax Credit (ITC) expanded under the 2022 Inflation Reduction Act and USDA’s Rural Energy for America Program (REAP) grants. Additionally, some states have created agrivoltaics-specific incentive programs, such as Colorado’s Research & Demonstration Grants and its ACRE3 Program, New Jersey’s Dual-Use Agrivoltaics Pilot Program, and Massachusetts’ SMART Program. While California does not currently have an agrivoltaics-specific incentive program, the policy landscape is evolving. Join as a HARVEST California member to access our latest California policy brief.
Capital Expenditure (CapEx)
Capital expenditure (CapEx) is the upfront cost of building a system, including panels, racking, inverters, wiring, and site preparation.
Agrivoltaics systems can carry higher CapEx than conventional solar systems because design choices such as taller racking or tracking technologies can add both material and labor costs. A 2020 report from the National Renewable Energy Laboratory (now the National Lab of the Rockies) provides an analysis of the variables impacting capital costs for dual-use photovoltaic installations.
Operating Expenditure (OpEx)
Operating expenditure (OpEx) covers the ongoing costs of running a system over its lifetime, including maintenance, insurance, monitoring, panel cleaning, and vegetation management.
Agrivoltaics systems can lower OpEx. Grazing livestock, for example, can reduce the cost of vegetation management as compared to conventional mowing. Because systems operate for decades, small differences in annual OpEx add up over a project’s life.
Photo: Rutgers University Image Gallery of Agrivoltaics Installations
Levelized Cost of Energy (LCoE)
Levelized cost of energy (LCoE) is the average cost of each unit of electricity a system produces over its lifetime. It is calculated by combining upfront and ongoing costs (CapEx and OpEx) and dividing by the total electricity the system is expected to generate.
LCoE makes it possible to compare the economic impacts of different system designs. This is useful in agrivoltaics, as choices such as panel height, row spacing, and tracking can affect both system cost and electricity production.
Interconnection
Interconnection is the process of connecting a solar or agrivoltaics project to the electricity grid. It typically involves an application, technical studies, and sometimes upgrades to nearby grid infrastructure, which can add both time and cost to a project.
In California, smaller projects that connect to the local distribution grid generally go through a utility process, such as Rule 21 for the state’s large investor-owned utilities. Large projects connecting to the transmission system go through the California Independent System Operator (CAISO) interconnection process.
Power Purchase Agreement (PPA)
A power purchase agreement (PPA) is a long-term contract in which a buyer – such as a utility, company, or community energy program – agrees to purchase electricity from a solar or agrivoltaics project at an agreed price for a set period of time.
Because a PPA provides predictable revenue over many years, it is often what makes it possible to finance a project with a bank loan. For landowners and farmers, the terms of a PPA determine how much revenue an agrivoltaics system generates and for how long.
Dual Revenue Stream
A dual revenue stream means a landowner or farmer is earning income from the same land in two ways at once: from agricultural production and from energy production.
This is one of the central economic arguments for agrivoltaics, as it can increase total revenue and profitability. It can also help limit financial risk – if one revenue stream is down in a given year, it may be offset by the other.
Photo: Rutgers University Image Gallery of Agrivoltaics Installations
Front-of-Meter
A front-of-meter system connects directly to the grid and sells its electricity to a utility company, a community solar program, or into the wholesale market.
Most large solar projects, including some agrivoltaics installations, are front-of-meter. These projects earn revenue through mechanisms like PPAs, and economic feasibility depends on interconnection and electricity market prices.
Behind-the-Meter
A behind-the-meter system connects on the landowner’s side of the utility meter and supplies electricity directly to the farming operation or a microgrid.
The economic value comes primarily from cost savings. For example, the energy generated by an agrivoltaics system can be used to power irrigation pumps, cold storage, or processing equipment – rather than buying that electricity from a utility company. For many California farms, a behind-the-meter system is the most effective and efficient way to integrate solar energy into their business.
For a quick overview of the basic differences between front-of-meter and behind-the-meter systems (not specific to agrivoltaics), check out this video.
Payback Period
The payback period is the time it takes for an agrivoltaics system’s combined savings and revenue to equal its upfront cost.
Incentives, electricity prices, and the strength of both the agriculture and energy revenue streams all influence payback period. Because of these variations and fluctuations, the payback period for agrivoltaics systems varies.
Landowners and farmers interested in exploring agrivoltaics feasibility for their operation can use InSPIRE’s Agrivoltaics Design and Analysis Model (ADAM), a free techno-economic tool developed and maintained by the National Lab of the Rockies with support from the U.S. Department of Energy.
Knowing these terms can make it easier to ask important questions when evaluating the economic feasibility of an agrivoltaics project. Are there specific questions you’d like us to focus on in future posts? As always, we welcome suggestions.