Renewable energy Agri PV: how the photovoltaics of the future work

Renewable energies are expected to make up 80 percent of the German electricity mix by 2030 - this target was announced by Federal Minister Robert Habeck at the beginning of 2023.

But there is still a long way to go: Doubling the number of onshore wind farms, tripling the number of offshore wind farms and quadrupling the number of solar panels are required to achieve this goal.¹ And the question of which areas are eligible for this expansion remains unanswered to date.

The Federal Ministry for Economic Affairs and Climate Change Mitigation provides for the use of suitable roof space as well as commercial and private new buildings. However, this is probably not the only way to achieve this ambitious goal. This is where two innovative approaches that can harmonise agriculture and electricity production come into play: Agri-PV and Floating PV. We will take a closer look at the concept of agri-photovoltaics here.

The Agri-PV concept is largely driven by the Fraunhofer Institute for Solar Energy Systems ISE. It is based on the idea of enabling the dual use of agricultural land - on the one hand for food production, and on the other hand for energy production by solar panels.

The concept allows a lot of flexibility to adapt to different agricultural use conditions and plant species. It can even optimise plant cultivation in hot regions by placing the panels above the plants, protecting them from too much sunlight. In addition, extracted condensation water can be used for irrigation.

Agri-PV also fulfils additional agricultural functions in cooler regions: here, the panels can serve as protection against hail, frost or storms.

The Agri-PV concept is still not widespread, but figures from the Fraunhofer Institute show that demand is increasing exponentially: the global output of agri PV plants has increased very significantly from 5 MWp (2012) to over 14,000 MWp – or 14 GWp – (2020) in just eight years. The technical potential for Germany alone is 1.7 TWp - i.e. 120 times the power currently installed worldwide.

The development of the agri-PV market is largely driven by technological innovations. Specially developed solar panels that allow enough light for the photosynthesis of the crops grown underneath are just one example of how technological advances can optimise the productivity of both areas - energy and agriculture.

These technological developments make it possible to maximise energy yields while preserving agricultural land and even increasing its efficiency.

Agri-PV offers an attractive option for investors looking for future-oriented and sustainable investment opportunities. The integration of Agri-PV into the investment portfolio not only offers the opportunity to participate in the increasing demand for renewable energies, but also to contribute to diversification and risk minimisation.

Agri-PV projects represent stable, future-proof tangible assets that are less vulnerable to fluctuations in traditional energy markets and promise continuous returns. These yields also represent a significant benefit for farmers and give them a certain degree of planning certainty, so that compensation claims are lower in the long term.

• Protection of plants from extreme weather conditions: Agri-PV plants provide valuable protection for crops below against hail, heavy rain and intense sunlight, resulting in a more stable and safer harvest.
• Reduction of water consumption: The partial shading provided by the solar modules leads to reduced evaporation, which significantly reduces the water requirement for irrigation - a decisive benefit, especially in dry regions.
• Improvement of microclimate: The presence of solar panels can lead to a more balanced microclimate over the cultivation areas. This helps to maintain soil moisture and promotes healthy plant growth.

• Efficient use of space: By duplicating land use, Agri-PV enables efficient and sustainable energy production, particularly valuable in areas where available land is scarce.
• Contribution to the energy transition: The production of solar energy from agricultural land supports the reduction of CO2 emissions and thus actively contributes to the achievement of climate targets.
• Economic synergies: Farmers benefit from an additional source of income by selling the generated electricity or using it directly, which can lead to a reduction in operating costs.

• Stable and predictable returns: Investments in agri-PV projects offer an attractive return perspective characterised by long-term leases with farmers and stable revenues from the sale of solar power. This ensures a plannable and low-risk capital investment, which is of particular benefit in uncertain market phases.
• Contribution to sustainable investments: Agri-PV combines ecological sustainability with economic efficiency and enables investors to actively contribute to the energy transition and environmental protection. Such green investments are increasingly meeting the demands of stakeholders and consumers for responsible investment opportunities.
• Access to grants and tax benefits: Many countries offer specific incentives, support programmes and tax reliefs for investments in renewable energy, including Agri-PV. An example of this is the subsidy programme under the Hessian Energy Act.² Such initiatives can reduce investment costs and further increase the financial attractiveness of projects.
• Diversification of investment portfolio: Agri-PV projects offer an excellent opportunity for diversification for investors by adding an additional asset class to their portfolio that operates independently of traditional financial markets. Agri-PV’s specific risk-return structure, coupled with its low correlation to traditional forms of investment such as equities and bonds, can reduce the overall risk of the portfolio and help stabilise returns.

In addition to the fundamental diversification offered by Agri-PV projects for investment portfolios, they also enable specific diversification within the renewable energy asset class. Compared to traditional solar or wind energy projects, agri-PV systems offer a unique combination of agricultural production and energy generation. This duality opens up new dimensions in terms of risk management and potential returns.

By investing in Agri-PV, investors can diversify their exposure to renewable energy and hedge against sector-specific risks, such as regulatory changes, technological developments or fluctuating energy prices.

Agri-photovoltaics embodies a transformative force at the interface of renewable energy and agriculture that has the potential to shape the future of both sectors sustainably. Due to legal incentives and falling installation costs in the long term, innovative concepts such as Agri-PV (but also Floating-PV) are expected to continue to establish themselves in the coming years.

Thanks to their versatility, they offer an optimal opportunity not only for energy suppliers, but also for farmers and other economic actors to increase the economic potential of easily used land while contributing to a more sustainable electricity mix.

Agri-PV demonstrates how innovative technologies can be used to support plant health, protect agriculture from extreme weather conditions and make efficient use of land resources - all for the benefit of society and the environment.

At the Commerz Real Group, we pay great attention to the development of such innovations in order to identify such promising opportunities early enough and make them us and our investors useable. In any case, the exponential prevalence of such technologies makes us optimistic – and shows what future methods of more sustainable energy production can look like.