Solar energy and energy efficiency, economic and environmental wins for agricultural producers

first_imgShare Facebook Twitter Google + LinkedIn Pinterest By Fred MichelThe EPA estimates that U.S. agriculture contributes 9% of total U.S. greenhouse gas emissions. While much less than the emissions attributed to transportation, industry and electricity generation sectors of the economy, many producers are becoming concerned about the widespread changes to the climate caused by these emissions, but are unsure about what to do about it. There are now ways for agricultural producers and rural businesses to both address this concern and improve the bottom line through energy efficiency improvements and solar energy production.An Ohio State University Extension program called, “Energize Ohio” provides factsheets, videos and tools for assessing the economic benefits and incentives available for Agricultural Solar systems in Ohio. It also provides a directory of energy efficiency programs offered by Ohio Utilities. For example, AEP Ohio has a new program for agricultural producers offering incentives for LED lighting, variable speed pumps, high efficiency fans and dryers and temperature controllers. Improving energy efficiency is the most cost-effective way to reduce the carbon footprint of agriculture.Agricultural solar energy systems generate electricity from sunshine and can be installed on roofs or in open areas. They provide electricity to farms and other rural businesses at a fixed cost that in most cases is much lower than the cost for electricity provided by a local utility. However, the specific costs vary considerably based on location, utility provider, energy use profile, economic incentives and how the utility treats excess generation.The U.S. Department of Energy National Renewable Energy lab (NREL) has developed a tool called the Systems Analysis Model (SAM) that can be downloaded for free and used to estimate the costs and payback for solar systems at farms, residences and businesses. It is a comprehensive model that estimates the costs, energy production, payback and many other metrics of solar energy systems based on system design, the mounting angle of the panels, shading, equipment selected, weather conditions, utility provider, the cost of money, incentives, net metering and other variables. It includes databases of every available solar panel and inverter sold in the U.S., links to utility rates and weather data, and tools for estimating financial returns.The overall costs of agricultural solar systems have dropped dramatically over the past decade. One reason for this is the declining cost of solar panels, racking systems and inverters. The installed costs of a solar systems have dropped to around $2 per watt. Another is the availability of incentives for renewable energy systems from the federal and state governments and laws that govern public utilities requiring them to allow the interconnection of solar energy and other renewable energy systems into the electricity grid, and to make payments to renewable energy generators for electricity produced also known as “net metering”.These incentives include the Federal Renewable Energy Tax credit, which pays for 30% of the cost of a renewable energy system through a tax credit. This program will begin to phase out in 2019. Another is the Federal Renewable Energy for Agricultural Producers (REAP) program available from USDA. This program has two parts, which can be used individually or together. One is a grant for up to 25% of the project cost, and the other is a loan guarantee for 75% of the costs. The program is competitive and applications with the highest scores receive grants, however loan guarantees are easier to obtain.There is also the Modified Accelerated Cost Recovery System (MACRS), which is an economic tool allowing businesses to depreciate capital assets used for solar energy systems over just a five year period on their tax forms, reducing tax liability and accelerating the rate of return on a solar investment. Solar Renewable Energy Credits (SREC), are another type of incentive but their value has greatly decreased in recent years due to the decision by the State legislature to reduce the requirements for renewable energy production by Ohio public utilities. Still, at a current value of around $15 per SREC, this incentive provides an additional 1.5 cents per kWh for solar electricity. The Ohio Energy Loan Fund is a state incentive that can reduce the costs of borrowing money for energy efficiency and renewable energy projects.Net metering is a mechanism that credits solar energy producers for the electricity they add to the grid. If more energy is produced than used during a billing period, then a credit either in dollars or kWh for the excess production is made to the producer. Net metering is required to be offered by all publicly owned utilities in Ohio. However, rural electric co-ops, municipal utilities and alternate energy providers offered through publicly owned utilities are not required to offer net metering, and some do not. This information is not easily available and the Public Utilities Commission of Ohio (PUCO) does not provide it on their website comparing electricity providers. Determining how your utility treats excess generation is important in determining the cost benefit for an agricultural solar system.This is because the type of net metering the utility provides has a significant impact on the payback period for an agricultural solar system. An extreme example of this is a 20 kW solar system used to provide energy for grain drying by an Ohio farmer. The solar electricity is generated over a year while electricity used for grain drying is only used for a few months. According to a SAM model of this system, with no net metering and no incentives, it would not make economic sense. However, the payback period is 20 years when net metering is offered based on a dollar credit each billing period, even when no incentives are used. But if kWh of electricity were credited each billing period, as some utilities do, and the accumulated kWh over the year were credited to the producer and used for drying, it would have a payback period of just 12 years, even without any incentives. When federal incentives are used, the payback period drops to just 9 years, equivalent to reducing energy costs by 70% for the 25-year life of the solar system. Regardless, the system would reduce CO2 emissions for electricity generation by 460 tons over 25 years compared to using Ohio grid electricity. This makes this a win for both the environment and the producer’s bottom line. Fred Michel, Professor, can be reached at 330-263-3859 or [email protected] This column is provided by The Ohio State University Department of Food, Agricultural and Biological Engineering, OSU Extension, Ohio Agricultural Research & Development Center, and the College of Food, Agricultural and Environmental Sciences.last_img

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