With steadily increasing energy costs and an ever-uncertain future, it makes sound economic sense to take a look at improving the energy portfolio on Ohio farms.
“Regardless of the strides we have made in energy efficiency, it will not offset the increasing global demand for energy. On average the U.S. represents around 4% of the world’s population, yet consumes just over 18% of world’s total energy. Furthermore, Ohio is a large energy consumption state, ranking 7th in 2013” said Eric Romich, OSU Extension energy development specialist. “Ohio is also home to ageing energy generation facilities. Accelerated retirements of electricity generation capacity will likely result in continued price increases for electricity.”
Whether it is solar or wind energy investment, there are a number of issues to consider when making decisions about conservation and generation of energy on-farm. It is best to start with a broad look at the energy use and goals for the farm.
“Farmers are looking at options to invest in technologies that will lower future energy cost allowing their farm to become more energy efficient. When you get down to it in terms of investing in energy, I believe in the energy pyramid which starts with an assessment of energy use, then implementing conservation practices, investing in energy efficiency technologies, and ultimately considering alternative methods of generation,” Romich said. “It starts with an assessment of usage to understand what the issues are on your farm and energy costs. Is there unnecessary use of energy? Find it and use simple efficiency measures to address it. On average, your payback for an investment on an energy efficiency project is going to be quicker than investments in renewable energy generation.”
Once energy conservation and efficiency measures are in place, then on-site energy generation options can be more properly considered.
“When we talk about trends in energy, right now it is solar. There is photovoltaic (PV) solar, which is most of what we are seeing in Ohio. This is directly converting sunlight into electricity,” Romich said. “We don’t see a lot of small scale wind right now. There is also solar thermal and there are applications for that on dairy farms. Some are closed loops and some are open. Egg production facilities, for example, can use solar thermal to heat water for washing the eggs. If you need a lot of hot water for something, solar thermal can pay.”
Due to improving technology and efficiency, PV solar also has potential to pay off in the right farm situations.
“There are a couple of things driving interest with PV solar in the agricultural community right now. There is a 30% federal investment tax credit for the equipment and installation cost and it is scheduled to sunset Dec. 31 of 2016. To be clear, this is not upfront money, but a tax credit.” he said. “Also, the Rural Energy for America Program (REAP) grants through USDA can cover up to 25% of the project. While the REAP is a great program, it is a competitive program and it is not a guarantee that you’ll get funded. However, if you receive the REAP grant and you stack all of these benefits together, it can make for an attractive project.”
An investment in PV solar can be particularly beneficial for larger livestock operations
“On those kinds of farms, it is fairly easy to calculate your year-after-year energy usage. It can be much harder to estimate energy costs on a grain farm where drying grain can be very different from year to year,” Romich said. “With net metering you want to work with your utility to match your system with your energy needs and the utility’s existing infrastructure. We are seeing systems going in for grain dryers too, but you need to analyze a larger sample of your usage rather than just looking at last year’s bill. Regardless of the type of farm you have, you should contact your electric utility provider to review a proposed project before signing any paperwork with a developer. Your energy provider needs to be viewed as a partner on this.”
Take a look at factors including meter charges, demand charges for offsetting energy use during periods of peak demand, the need for three-phase electric, costs associated with insuring the systems, and long term energy use.
“Get some quotes. You’re not going to go buy the first tractor you see. You’re going to look around. Do the same thing with solar. It can be hard when you are looking at proposals to really understand the cost of the materials and labor to make decisions. Having multiple quotes helps you to see that and determine what you like and what you don’t,” Romich said. “Details can make a big impact. What factors are you using to calculate energy savings? Have escalation rates been applied to energy costs, and if so at what rate? Insurance cost is rarely accounted for, but if you are putting a $100,000 solar system on your barn and a wind storm comes through, you want to make sure you’re in a situation to get it up and running again.”
Another important — but often confusing — factor in making the decision for solar is the Solar Renewable Energy Credits (SRECs).
“SRECs were created by policy as a means of tracking the generation of renewable energy. If you have a solar system certified by the Public Utilities Commission of Ohio, an SREC will be created for every megawatt hour of electricity produced by your solar system. An electronic database tracks the amount of electricity generated by your system and the related creation of renewable energy credits,” Romich said. “There are a number of different ways a system owner can sell their SRECs. You may choose to personally manage the sale of your SRECs as they are generated via a web-based exchange program, enter into an agreement to sell your SRECs to an aggregator or broker, or sell your SRECs directly to the developer who built their system.”
Ohio’s alternative energy portfolio standards require Ohio’s electric distribution utilities or electric services companies to diversify their electricity generation to include 12.5% renewable energy by 2027. Basically, utilities can purchase SRECs from other certified systems to comply with the requirement, creating a demand for SRECs in Ohio. However, the passage of SB 310 in 2014 put a two-year freeze on Ohio’s alternative energy portfolio standards.
“That hurt the value of SRECs in Ohio. There is no assigned value to an SREC, as the prices are influenced by renewable energy policy, supply and demand,” Romich said. “In Ohio the solar weighted average price per certificate on the PJM Generation Attribute Tracking System reached a high price of $471 in 2010 and a low price of $85 in 2015.”
This unpredictability of SRECs can make it hard to use them in making decisions about whether to invest in solar or not. John Lindner, from Clark County, for example owns SRECs produced by the solar panels on his farm (see the related story on page 29) but because they are undependable, Lindner did not factor SRECs into the payback time for his investment. The sale of his SRECs will just be extra.
“John owns those and they are his to sell or he can hold them and see if the price goes back up,” Romich said. “Some solar proposals will try to oversimplify the transaction of SRECs by calling it a discount, rebate, payment, allowance or refund. Regardless of what you call an SREC agreement, the value of these agreements can be significant, and the terms can extend for 20 years or more. In addition, the sale of an SREC is a taxable transaction and the sale proceeds will be taxed as ordinary income. If a system owner agrees to receive money upfront for the rights to their SRECs, there will typically be a contract associated with the agreement. The complexity of the agreements can vary significantly and in some cases you may want to have an attorney representing your best interest look at the contract before signing any paperwork.”
There are also many factors to consider with the specifics of the farm site for solar, said Chad Martin, the renewable energy Extension specialist at Purdue University.
“Look at ground mounted versus rooftops. It is easier to adjust them according to the time of year when they are on the ground compared to on the roof,” Martin said. “We saw one guy who wanted to use them for shade in his cattle pasture. Is there space on the ground? Is there enough space for roof mounting? What warranties are out there for ground or roof? Talk to other farmers who have put them in, that can really help too.”
Once the myriad of variables has been considered, they need to be tallied to find the length of time required to pay back, and benefit financially from, the significant initial investment.
“If you can hit 10 years or less on the payback I think it has some merit. Panels are typically warrantied for 20 to 25 years and the warranty is 10 to 15 years on inverters that transfer direct current from the solar to alternating current. You need to look at this from a long-term perspective. This is a long-term investment and you need to look at it this way,” Martin said. “You also need to look at what your main motivation is. It is economic or environmental? There is security in knowing you can produce a percentage of your farm’s electrical needs and you can really reduce your variable costs that continue to rise. In 1990 we were at 5.4 cents per kilowatt-hour and in March of this year it was 9.83 cents. There has been a steady increase and our facilities are aging. When you look at that, some farms are concerned about the rising costs and getting the energy they need in the future. Solar energy can help address that challenge.”