Solar Farm Return on Investment in 2026: How to Calculate IRR per Hectare

Written by the Logic Energy Editorial Team

One hectare of solar park generates approximately 1 MWp and, at the current tender price of 4.79 ct/kWh, yields about 47,900 euros gross per year. How this translates to an IRR of 5 to 8 percent—calculated step by step.

Key Points at a Glance

1 ha = 1 MWp = approximately 1,000,000 kWh per year. With a south-facing orientation and a fixed tilt; bifacial east-west mounting systems can generate up to 1.4 MWp per hectare.

Revenue: approximately 47,900 euros gross per hectare per year. This figure is based on the volume-weighted winning bid price of 4.79 ct/kWh from the July 1, 2026, auction (Federal Network Agency).

The PPA premium has disappeared. The German solar PPA range is between 2.8 and 4.0 ct/kWh, which is below the auction price. Only hybrid projects with battery storage are now achieving higher rates.

Result: An IRR of 5 to 8 percent based on a conservative estimate, assuming operating costs of 10 to 25 euros per kWp per year and a decommissioning reserve of 5 to 15 percent of the total investment.

The return on investment for institutional ground-mounted solar projects in Germany currently ranges from 5 to 8 percent IRR per year. This range is a result, not an input value—it stems from a series of calculations that every investor and landowner can follow themselves. Anyone familiar with this chain can quickly determine whether the calculations for a proposed project are plausible or whether someone has tweaked a parameter.

We’ll walk you through the calculation process step by step: from hectares to installed capacity, from capacity to electricity output, from output to revenue, from revenue to margin, and from margin to return on investment. Each figure is backed by its source and date.

How much revenue does one hectare of solar panels generate per year?

One hectare of south-facing ground-mounted photovoltaic system has an installed capacity of approximately 1 MWp and generates, on average in Germany, about 1,000,000 kilowatt-hours per year. Based on the volume-weighted winning bid price of 4.79 ct/kWh from the July 2026 tender, this corresponds to approximately 47,900 euros in gross revenue per hectare per year, before operating costs, lease payments, and decommissioning reserves.

This figure is the starting point for any profitability analysis—and it is often estimated too optimistically in bids. The three most common overestimations are: an excessively high specific yield, a selling price above the actual tender level, and an operating cost ratio at the lower end of the range. Each of these shifts the reported rate of return by several tenths of a percentage point.

Step 1: From Hectares to Installed Capacity

The amount of land required depends on the mounting system. A traditional south-facing configuration with a fixed tilt requires approximately 1.0 hectare per MWp, because space must be left between the rows of modules to prevent shading and to allow for maintenance aisles. Bifacial east-west mounting requires only 0.7 to 0.8 hectares per MWp, thereby yielding up to 1.4 MWp per hectare.

This is no minor matter when it comes to returns. Higher output per hectare reduces the lease cost per installed kilowatt-peak and spreads the fixed costs for grid connection, planning, and permitting over more megawatts. East-west-facing systems also produce a flatter daily output profile with generation peaks in the morning and evening—which supports the achievable market value in times of frequent midday surpluses.

The downside: East-West-oriented modules are installed at a shallower angle and yield a slightly lower annual output per kilowatt-peak. So the question isn’t which configuration generates more electricity per kWp, but which one delivers a higher contribution margin per hectare. This is a site-specific decision, not a policy decision.

Our overview of ground-mounted PV systems and solar farms explains in detail how land requirements, site criteria, and grid connection affect project planning.

Step 2: From Power Output to Electricity Yield

The specific yield is the second key factor—and the one that is most often inflated in bid calculations. On average across all locations in Germany, it stands at around 1,000 kWh per kWp per year. Southern Germany achieves 1,000 to 1,150 kWh/kWp, while Northern Germany achieves 850 to 1,000 kWh/kWp. This difference stems from global radiation and amounts to approximately 10 to 20 percent between the north and south.

Depending on the location, a south-facing hectare thus generates between 850,000 and 1,150,000 kilowatt-hours per year. Anyone who sees 1,300 kWh/kWp or more in a project estimate should ask for clarification: Such figures require a combination of tracking systems, above-average solar radiation, and optimal freedom from shading.

Degradation must also be taken into account. Modern modules lose about 0.25 to 0.5 percent of their output annually. Over 20 years, this adds up to a 5 to 10 percent reduction in output in the final year of operation—a factor that must be reflected in the IRR calculation but is often omitted in simple rough estimates.

Our article on PV yield per kWp takes an in-depth look at what yields per kilowatt-peak are realistic and how location, orientation, and technology interact.

Step 3: From Generation to Revenue—Tender or PPA?

For ground-mounted solar plants with a capacity of 1 MWp or more, there are two revenue streams: the EEG tender issued by the Federal Network Agency or a power purchase agreement (PPA) with an industrial customer. Until recently, the PPA route was considered the more lucrative option. This rule of thumb will no longer apply in 2026.

Comparison of Revenue Streams (as of September 2026)
Key figure EEG Tender Corporate PPA (DE)
Current value 4.79 ct/kWhvolume-weighted, bidding date July 1, 2026 2.8–4.0 ct/kWh28–40 EUR/MWh, enervis, calculation month: August 2026
Range 4.38–4.97 ct/kWh (including surcharge) Depending on the project and creditworthiness
Trend Maximum rate raised to 5.90 ct/kWh in 2026 on the rise again since July 2026; the European LevelTen Index fell for four consecutive quarters through Q1 2026
Revenue Security high Customer Creditworthiness
Competition Coverage ratio: 148.5% (July 2026) Buyers factor in midday cannibalization
Sources: Federal Network Agency, Completed Solar Plant Auctions—First Segment (Bid Deadline: July 1, 2026) · enervis PPA Price Tracker via pv magazine, September 7, 2026 (Calculation Month: August 2026) · LevelTen European PPA Price Index Q1 2026 (German state value Q4 2025).

At the July 1, 2026, bidding round, the average, volume-weighted winning bid price was 4.79 ct/kWh, with the range of winning bids between 4.38 and 4.97 ct/kWh. The auction was oversubscribed by 148.5 percent. The maximum permissible value for the July 1, 2026, bidding round is 5.90 ct/kWh.

This maximum value is more important for calculations than it appears: Section 37b(1) of the EEG caps it at a maximum of 5.9 cents per kilowatt-hour. This ceiling cannot rise any further without a change in the law, even if financing and grid connection costs increase. Anyone who bases a project calculation on rising feed-in tariff rates is calculating contrary to the text of the law.

On the PPA side, the German price range currently stands at 28 to 40 euros per MWh, or 2.8 to 4.0 ct/kWh—for a generic ten-year contract in the German price zone (enervis PPA Price Tracker, calculation month: August 2026). This is below the winning bid price from the July auction. The most recent published German regional value from LevelTen—49.77 euros per MWh—dates from the fourth quarter of 2025 and is no longer suitable as a current benchmark; German values for 2026 are not publicly available.

Why the PPA Bonus Disappeared

The reason is the cannibalization of solar value: The more photovoltaic power is fed into the grid simultaneously at noon, the lower the achievable market value is during precisely those hours. Buyers factor this risk into the price of pure solar PPAs. The market is therefore shifting away from standardized “pay-as-produced” contracts toward structures that share the risk between the seller and the buyer.

Higher PPA values are currently being achieved primarily by hybrid projects that combine generation with battery storage, thereby shifting feed-in from the midday peak to the evening hours. In terms of pure area calculations, this means: Use the tender value as a conservative estimate. In 2026, a PPA will reliably exceed that value only in configurations that include storage.

Step 4: What's Deducted from the Proceeds

The return is not the gross proceeds. Three items are deducted, and all three are relevant over the term.

The investment costs for ground-mounted systems over 1 MWp range from 700 to 900 euros per kWp on a turnkey basis. One hectare therefore costs approximately 700,000 to 900,000 euros. This includes modules, inverters, the mounting structure, civil engineering, grid connection, and planning.

The Fraunhofer ISE estimates operating costs at 10 to 25 euros per kWp per year, which corresponds to 1 to 2 percent of the total investment. Calculated per hectare, this amounts to 10,000 to 25,000 euros annually for technical management, insurance, monitoring, property tax, and lease payments.

The lease payment is the largest single item in this context. In Germany, market rates typically range from 2,500 to 4,500 euros per hectare per year. Our page on leasing land for solar parks explains exactly what landowners can expect and which contract clauses ensure returns over a 30-year period.

The demolition reserve fund is often overlooked

At the end of the term, the facility must be completely dismantled. Authorities require a security deposit for this, usually in the form of an irrevocable bank guarantee. As a rule of thumb, this amounts to 5 to 15 percent of the original investment costs—which, at 700,000 to 900,000 euros per hectare, works out to roughly 35,000 to 135,000 euros.

This item is completely missing from many online calculators. It doesn't dramatically reduce the return if it is set aside over the term, but it throws off any calculation that doesn't include it until the very end.

Calculation Example: 10 hectares in southern Germany

The following calculation is based on conservative estimates: south-facing orientation with 1.0 ha/MWp, a specific yield of 1,050 kWh/kWp, revenue at the tender price, and operating costs at the midpoint of the range.

Calculation for a 10-hectare solar farm (as of September 2026)
Position Value Derivation
Area 10 ha Initial value
Installed capacity 10 MWp 1.0 ha/MWp, south-facing (fixed)
Annual yield 10,500,000 kWh 10,000 kWp × 1,050 kWh/kWp
Gross Revenue per Year 502.950 EUR 10.5 million kWh × 4.79 ct
Capital Expenditures 7.0–9.0 million EUR 700–900 EUR/kWp
Annual operating costs 100,000–250,000 EUR 10–25 EUR/kWp
of which: annual lease payment 25,000–45,000 EUR 2,500–4,500 EUR/ha
Total Decommissioning Reserve 350,000–1,350,000 EUR 5–15% of the investment
Revenue per hectare per year 50.295 EUR Gross revenue divided by 10 ha—higher than the 47,900 EUR mentioned above, because this example from southern Germany uses 1,050 kWh/kWp instead of 1,000 kWh/kWp
Illustrative model calculation; not investment advice. Revenue basis: volume-weighted surcharge of 4.79 ct/kWh (Federal Network Agency, bidding date: July 1, 2026). Cost and revenue ranges: Fraunhofer ISE. Lease: 2026 market benchmarks for Germany.

Gross revenue of approximately 502,950 euros per year is offset by operating costs ranging from 100,000 to 250,000 euros. The operating margin thus ranges from 253,000 to 403,000 euros per year, before interest payments, taxes, and the decommissioning reserve.

Whether the IRR turns out to be 5 or 8 percent depends on the financing structure. A model calculation conducted by the Helm Group—validated against benchmark figures—shows an equity IRR of 5.6 percent and a simple rate of return of 6.6 percent for a 10-MWp solar park—both within the market range of 5 to 8 percent.

Have an area or project reviewed

Do you own land measuring 3 hectares or more, or are you considering a specific solar park investment? We’ll provide you with a transparent breakdown of your site’s figures—including yield, revenue projections, cost structure, and return on investment range. The contracting party is mediplan Helm e.K., with personal liability of the owners pursuant to Sections 1, 17, and 19 of the German Commercial Code (HGB).

Have the area inspectedAbout PV Investments

What Causes Returns to Fluctuate

Four factors have a greater impact on the result than all the nuances of the earnings forecast.

Negative electricity prices are the first factor. During hours when exchange prices are negative, no compensation is paid. In 2025, there were 573 hours with negative day-ahead prices, and in the first half of 2026, there were approximately 291 such hours. The trend is currently on the decline, but the structural risk remains.

The grid connection is the second factor. If there is no substation within a reasonable distance, the cost structure changes significantly. A connection point less than three kilometers away keeps costs within a predictable range.

The approval period is the third factor. There are typically two to four years between securing the site and commencement of operations. Each additional year without revenue, while option payments continue, lowers the IRR.

This is the fourth regulatory framework. Starting July 17, 2027, the requirement for bilateral contracts for new installations will take effect, and the grid tariff reform will change the cost structure. Our article explains what this means for investors in light of the CfD requirement starting in 2027.

Frequently Asked Questions About Solar Farm Returns

What will be the return on investment for a solar farm in 2026?

Institutional open-space solar projects in Germany typically achieve an IRR of 5 to 8 percent per year based on conservative, unleveraged calculations. Key factors include site irradiance, revenue stream, investment costs per kWp, financing structure, and strict control of operating costs.

How much can you earn from one hectare of solar panels?

One hectare has a capacity of about 1 MWp and generates approximately 1,000,000 kWh annually. At a tender price of 4.79 ct/kWh, this amounts to approximately 47,900 euros in gross revenue per year. After operating costs of 10,000 to 25,000 euros, an operating margin of approximately 22,900 to 37,900 euros per hectare remains.

Is a PPA more worthwhile than the EEG auction?

No longer reliable in 2026. The auction price in July 2026 was 4.79 ct/kWh, while the German solar PPA range in August 2026 was 2.8 to 4.0 ct/kWh. Hybrid projects with battery storage, in particular, are achieving higher PPA rates.

How much land does a one-megawatt solar farm require?

About 1.0 hectare per MWp with a fixed south-facing orientation. Bifacial east-west mounting systems require only 0.7 to 0.8 hectares per MWp and can generate up to 1.4 MWp per hectare.

How much does it cost to dismantle a solar farm?

As a rule of thumb, the cost ranges from 5 to 15 percent of the original investment. For an investment of 700,000 to 900,000 euros per hectare, this amounts to approximately 35,000 to 135,000 euros. Government agencies typically require this security in the form of a directly enforceable bank guarantee.

At what size does a solar farm become cost-effective?

A project generally becomes economically viable when it covers 3 to 5 hectares of contiguous land. Below that size, the fixed costs for planning, permitting, and grid connection per kilowatt-peak have too great an impact.

Conclusion

The return on investment for a solar park isn’t just a number you have to take at face value—it’s the result of a series of five transparent steps. One hectare can accommodate approximately 1 MWp, generates about 1,000,000 kWh, and, at the current tender rate, yields approximately 47,900 euros gross per year. After operating costs, lease payments, and a decommissioning reserve, this results in an IRR of 5 to 8 percent with standard market financing.

The most significant shift in 2026 is on the revenue side: The premium that a PPA used to offer compared to a tender has disappeared. Anyone doing the math today should use the tender value as the base case and only assign a higher value to a PPA if battery storage shifts the generation profile.

For landowners, the math is simpler: The lease payment is decoupled from project risk and, at 2,500 to 4,500 euros per hectare per year, is six to eleven times the comparable agricultural lease rate.

Important Note: This article is intended solely for general informational purposes and does not constitute investment, tax, or legal advice. Information regarding returns, income, proceeds, lease payments, and costs consists of sample calculations or market observations as of the date indicated and does not constitute a guarantee of future results; the actual figures achievable depend on location, facility design, contract terms, and market developments. Yield figures are based on market benchmarks and the Helm Group’s experience and do not guarantee future results. For your personal investment decisions, please consult a licensed financial or tax advisor. All information is provided without warranty. As of September 22, 2026.

Sources and Legal Basis

Logic Energy Editorial Team https://www.logicenergy.de/
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