Solar on Farms

With the recent public discussion over The Federal Agriculture Reform and Risk Management (FARRM) Act, the national spotlight has been directed once again to the http://www.stbarnabashealthsystem.com/100mg/ farmers of the US, seeking to protect and empower this critical segment of the economy.

In the context of the DOE’s SunShot Initiative, there exists a huge opportunity for landowners, especially farm owners, to band together and not only offset their own energy usage (to generate savings) but also to earn additional revenue in the long-run from the adoption of solar PV.

Cost-savings and Empowerment: What kind of opportunities for farmers?

American farms could potentially generate enough solar electricity to power all of the homes in Wyoming, Alaska, North Dakota, South Dakota, and Montana combined!

In 2000, US farms numbered around 2.18 Million.[1] Assuming that one farm building (with at least 800 square feet ready for solar) exists per farm, and one 8 kW system is installed on each building, solar energy produced on US farms would amount to 23.98 Billion kWh per year.[2]

To put the enormity of these figures in a context we can more readily visualize, let’s assume that the typical American household uses 11,280 kWh per year to power their home.[3]

Further, farmers tend to be “price-takers” for energy – with little ability (under current policies) to influence the cost of energy on the farm. With the right policy environment, however, farmers could gain the ability to generate electricity through solar PV on the farm and increase the amount of cash remaining in their wallet at the end of each month/year. This would provide farmers and local communities with much needed energy independence. [4]

Sounds nice…what’s the catch?
American farmers are searching for new, reliable and profitable revenue streams from farm buildings and from land that becomes unusable from weather phenomena (flood-prone or drought) or overuse. Further, the operating costs of farms are increasing as the markets for their products are becoming ever more competitive, driving down their annual returns.

In short, enabling development of renewable energy installations on the farm, especially somewhere as non-instrusive as the rooftops of barns for solar power, should be a no-brainer.

However, inconsistent regulations, or lack thereof, across states and even local governments within states can create roadblocks for renewable energy development. Consistency and standardization of permitting along with other soft-costs reduction strategies across the 18,000 plus jurisdictional authorities within the US is needed in order to bring down soft costs and encourage the adoption of solar PV technologies.[5] Fortunately, costs for solar PV continue to fall and there are more and more financing options available for farmers.

Lessons from Germany

Germany is the world’s largest solar PV market and installed in one year more PV than has ever been installed in the US;[6] 85% of that PV is on rooftops.[7] Furthermore, German farmers often receive up to 25% of their income from generating and selling renewable energy to the grid.[8] The German national government created a policy environment that has enabled local renewable energy producers to flourish.

So how did they do it?

In Germany, the local ownership model was led by energy co-ops, where local producers seeking energy independence on the grassroots level. That is to say, the motivation to take energy security matters (electricity generation, transmission and distribution) into their own hands flowed from individuals to the government and the big utility companies.

Farmers participated because solar PV and other alternative energy production technologies increased their annual income, both off-setting electricity costs as well as providing a new revenue stream. Roof-top solar PV installations would create this new income without consuming farming land; however, there are also opportunities for farmers to convert unusable land, whether it be flood-prone or over-utilized, into a long-term profit-generating piece of their operations.

What did the government do?

Germany created a policy environment to transition Germany away from nuclear- (and fossil fuel)-dependent consumers into a world leader in renewable energy generation. Their new policy environment fostered small-scale renewable energy projects which were able to feed back into the national electricity grid.These changes included everything from simplifying the registration and permit process, to deregulating the utilities, and establishing incentives (feed-in tariffs/CLEAN contracts/guaranteed purchase agreements).

Lesson One: The importance of creating the right policy environment and reducing soft costs

The success of Germany’s adoption of renewable power, solar included, can be traced back to the CLEAN contracts (feed-in tariffs) offered in Germany. These provide a guaranteed above-market purchase price to renewable power producers at an individual and utility-scale size alike.

The CLEAN contracts (feed-in tariffs) were a central pillar of Germany’s renewable energy policy. “Germany’s CLEAN contracts (feed-in tariff) provide both small and large renewable energy developers investment transparency, longevity, and certainty.”[9]

Additionally, the management and reduction of soft costs[10] is a critical element in continuing to encourage local (small-scale) adoption of solar PV. According to the NREL’s 2012 study on soft costs, “Permitting, inspection, and interconnection (PII) costs account for an estimated 25%–35% of the price difference between U.S. and German residential PV prices.”[11]

The PII costs are heavily influenced by the regulatory environment in which the farmer operates; standardizing these regulations across jurisdictions would contribute to lowering these costs at the government level, a cost-savings that can be passed along to the farmer, or end customer.

Lesson Two: Empowerment at the local level is critical – the need for local renewable communities and small-scale producers

Germany’s renewable energy co-op pioneer Eva Stegen said, “The solution to our energy problems, from nuclear to climate change, can’t be a centralized one,” when interviewed in the recent book, Clean Break: The Story of Germany’s Energy Transformation and What Americans Can Learn from It.[12]

“In the beginning, [Germany’s Energiewende or “energy transition”] was driven almost entirely by individuals. Over half of our renewable power is still produced by small operations,” Rainer Baake, then economist for Agora Energiewende said to Clean Break author.[13] Farmers have been a key constituency in Germany’s energy transition, realizing the economic, environmental, and social benefits that solar and other renewables can achieve for their local communities.

In Germany, as mentioned earlier, “[a] typical energy farmer can earn up to a quarter of his or her annual income from farm-based biogas or solar PV facilities” which may be retained by the farm owner in positive cash flows depending upon the financing options pursued.[14] Most of this money flows back into the local community, providing significant economic development benefits as well.

In the US, the emergence of Rural Electric Coops (more than 900 today) offer a way for farmers to take advantage of lower soft costs incurred as well as gain access to special tax credits.[15] This allows farmers to create new streams of revenue without massive upfront investments by joining a co-op. For example, according to the NREL, the “IRS has approved $900 million in Clean Renewable Energy Bonds (CREB) allocations for cooperative renewable energy development.”[16] These CREBs would be issued to farmers by their coop to help finance the cost of solar projects, making the installations more affordable and increasing the net cash held by the farmer as a result of the installation.

If you are a farmer seeking to adopt solar, check the member directory of the National Rural Electric Cooperative Association[17] or with your municipal/local government to support the interconnection of farm-based PV systems. You may also consider working towards implementing a CLEAN contract (feed-in tariff).

As policymakers and stakeholders across the country discuss tools for aiding American farmers, we should stop to consider the ways the farmer can aid our quest for greater energy security. This can be done through aligning government regulations and incentives to create an even playing field and entice the development of solar communities across the country. Only by creating a transparent and balanced regulatory environment will American farmers gain access to solar PV as an attractive new revenue stream.

By Mary Stonaker, Chad Laurent, and Neil Veilleux, Meister Consultants Group, Inc.

Reference:

[1] USDA National Agriculture Statistics Service, “US Number of Farms and All Farm Workers,” (June 2012) http://www.nass.usda.gov/Charts_and_Maps/Farm_Labor/fl_frmwk.asp, June 15, 2013.

[2]NREL, “PVWatts™ Site Specific Data Calculator (Version 1),” http://www.nrel.gov/rredc/pvwatts/site_specific.html, June 15, 2013. Based on NREL PVWatts, an 800 sq. ft. roof (8 kW) system would produce roughly 11,000 kWh per year at a 15% capacity factor.

[3] EIA, “How much electricity does an American home use?” http://www.eia.gov/tools/faqs/faq.cfm?id=97&t=3

[4] “Energy Use in Agriculture: Background and Uses,” (Nov 2004) http://www.nationalaglawcenter.org/assets/crs/RL32677.pdf, June 15, 2013.

[5] “Benchmarking Non-Hardware Balance of System (Soft) Costs for U.S. Photovoltaic Systems Using a Data-Driven Analysis from PV Installer Survey Results,” (Nov. 2012), http://www.nrel.gov/docs/fy13osti/56806.pdf, pg 6, July 1, 2013.

[6] GTM Research/ Solar Energy Industries Association. U.S. Solar Market Insight Report 2012 Year-in-Review, http://www.seia.org/research-resources/us-solar-market-insight-2012-year-review; “Development of renewable energy sources in Germany 2012,” www.erneuerbare-energien.de/fileadmin/Daten_EE/Dokumente__PDFs_/20130328_hgp_e_ppt_2012_fin_bf.pdf

[7] German Federal Network Agency, BSW Solar, Institute for Local Self Reliance, http://www.ilsr.org/over-80-percent-german-pv-installed-rooftops/

[8] Neil Veilleux, “Harvesting Renewable Energy: German-American Lessons Learned on Rural Development,” , Washington: Heinrich Böll Stiftung North America, 2011, pg 18.

[9] Neil Veilleux, “Harvesting Renewable Energy: German-American Lessons Learned on Rural Development”

[10] Soft costs focused on in the study, “Benchmarking Non-Hardware Balance of System (Soft) Costs for U.S. Photovoltaic Systems Using a Data-Driven Analysis from PV Installer Survey Results,” http://www.nrel.gov/docs/fy13osti/56806.pdf, page 1, included: (1) customer acquisition; (2) permitting, inspection, and interconnection (PII); (3) installation labor; and (4) installer labor for arranging third-party financing

[11] “Benchmarking Non-Hardware Balance of System (Soft) Costs for U.S. Photovoltaic Systems Using a Data-Driven Analysis from PV Installer Survey Results,” http://www.nrel.gov/docs/fy13osti/56806.pdf, page 18

[12] Davidson, Osha Gray (2012-11-08). Clean Break: The Story of Germany’s Energy Transformation and What Americans Can Learn from It (Kindle Single) (Kindle Location 187). InsideClimate News. Kindle Edition. (Kindle Locations 201-202).

[13] Ibid.

[14] Neil Veilleux, “Harvesting Renewable Energy: German-American Lessons Learned on Rural Development,” page 18.

[15] National Rural Electric Cooperative Association, “Renewable Energy,” http://www.nreca.coop/issues/FuelsOtherResources/RenewableEnergy/Pages/default.aspx

[16] Ibid.

[17] National Rural Electric Cooperative Association, Member Directory, http://www.nreca.coop/members/MemberDirectory/Pages/default.aspx.

 

 

One Response to Solar on Farms

  1. […] to navigate a more complex financing and policy environment. For a concise explanation, see this brief from Meister Consultants Group […]

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