An analytical framework to estimate the economics and adoption potential of dual land-use systems: The case of agrivoltaics

Abstract

CONTEXTDual land-use systems allow for a high land-use efficiency and are becoming increasingly relevant amid the rising scarcity of land. Agrivoltaics is a prominent example, yet there are farming system-specific trade-offs when simultaneously producing agricultural output and photovoltaic power. OBJECTIVEOur objective is to report a novel analytical Framework to assess the Economic benefits and the ADoption Potential of dual Land-Use Systems (FEADPLUS). The framework is developed with the goal of enabling a straightforward application in large farm-level datasets. METHODSFEADPLUS is grounded in neoclassical economic theory and applied to the case of agrivoltaics. An annualized profitability condition is derived and decomposed to identify the main components determining the agrivoltaic systems' economic viability, allowing for a comprehensive analysis of farm-specific synergies and trade-offs. Modifications enable calculation of the break-even electricity tariff and the relative change in agricultural contribution margin below the agrivoltaic system. The framework's functionality is demonstrated using data for cereal and vegetable farming systems on the Filder Plain, Southern Germany. RESULTS AND CONCLUSIONSWe show that farm-specific characteristics explain differences in the adoption potential under equal solar radiations. Cereal and vegetable farms could adopt agrivoltaics at a tariff of 8.63 and 9.00 EUR-cents kWh−1, respectively. Yet, the agricultural contribution margins from land cultivated below the agrivoltaics system decline by 40.3% and 73.9%, respectively. The decline is due to shading effects on crop yields, higher machinery and labor costs, and the foregone agricultural contribution margins from area lost due to the agrivoltaics mounting structure. In the presence of such trade-offs, the adoption of agrivoltaics is more profitable for farms growing low-value crops, such as cereals, than high-value crops like vegetables. Our sensitivity analyses show that this may change if there are synergies, e.g., positive shading effects on yield. Moreover, they indicate that agricultural contribution margins in some scenarios, which could incentivize farmers to abandon farming below the agrivoltaics system. This highlights the need for policymakers to put adequate safeguards in place. SIGNIFICANCEDual land-use systems are still understudied, but their high land-use efficiency becomes increasingly relevant in light of the mounting pressures on land. FEADPLUS is the first framework that allows estimation of economic benefits and adoption potential across farming systems and specific technology setups under different policy designs. To this end, it meets researchers' demands for a simple tool and allows for many extensions, e.g., incorporation of stochastics or aspects of (dynamic) optimization and economies of scale.