How dairy farms can save big money with renewable energy
Energy represents one of the biggest expenses for most dairy farms, other than feed. But unlike feed, you can actually do something to dramatically cut your energy costs by implementing smart renewable energy options.
And with the right approach, you can recover your investment in less than five years. Sometimes less.
If you’re tired of spending ever-increasing amounts on energy, and watching soaring costs eat into your profits, this article is well worth a few minutes of your attention.
How dairy farms use energy
This report reveals how typical dairy farms use energy.
17% of dairy farm energy gets used for vacuum pumps to assist with milking. Another 25% goes to the rest of the milking process, including cooling, storing, and processing, as well as cleaning the equipment. And yet another 22% goes to the HVAC system to keep the cows comfortable in the hot and cold months. An additional 24% goes to lighting.
Let’s put this in a clearer format:
- 17% vacuum pumps
- 25% milk cooling and processing
- 22% heating and cooling
- 24% lighting
Those four requirements eat up about 88% of energy usage on typical dairy farms in the study, which focused on New York farms.
Your figures may vary from those a bit, but it’s not likely to be that big of a difference, because any dairy farm will have all these needs, unless you’re doing all the milking without pumps. However, that still leaves about 70% for the other three energy intensive tasks.
Energy cost reduction — What’s possible?
Imagine then, if you could reduce your energy costs for this from 88% down to, say, 20%. That sort of reduction is possible with renewable energy.
With renewable energy production — especially solar power — you generate your own energy. As we at Ag Solar like to say, you own your power.
What about energy efficiency?
You couldn’t come close to saving these amounts of money relying only on energy efficiency. That’s not to say energy efficiency isn’t worth pursuing, but it can only save you so much on your total energy costs since you still have to pay the utility company for their power.
And because utility companies keep raising rates, you may not feel any actual savings on your power bill. For example, suppose you achieve a 10% reduction in energy usage through various energy efficiency strategies. That’s good — and those are real savings.
But suppose, over the next five years, your utility company raises rates 10%, too. In that case — which is not at all far-fetched as that’s only a 2% increase per year — you’ll be paying the same amount in five years as you are now. While you would have been paying more without the improvements, it doesn’t feel like you’ve saved anything. There’s no tangible or dramatic reduction in costs.
Plus, many energy efficiency upgrades take 8-12 years to reach the payback period, when you recover the costs of your initial investment. Combined with energy bill inflation, you’ll never have that moment where you feel like you’re profiting from your investments.
With solar power and other renewables, combined with the federal tax credit and a REAP grant, some dairy farms have reached the payback period in less than two years.
Renewable energy thus gives you a bigger bang for your buck, and you start profiting much sooner in most cases.
How do dairy farms get energy now?
Currently, most dairy farms can get energy from two sources:
- The utility company
- Your own fuel generation process
The power company charges you for consumption, and you don’t have a choice in which company to use, in most cases. It’s basically a monopoly. For your own fuel, you might use propane, natural gas, generators with conventional fuel, or perhaps other options. Of course, that too comes with a high price tag, and you’re dependent on fuel deliveries.
Both your current energy sources leave you powerless. You have to pay whatever the market demands. But with renewable energy production like solar power, you make your own power, which liberates you from dependence on outside, uncontrollable forces.
Renewable energy projects give freedom to dairy farmers.
How solar power saves money for dairy farms
Solar power saves big money for numerous reasons. Here are the main ones:
One-time fixed cost — inflation-proof
Once you’ve paid for your solar power system, you own it. The price never goes up again. It just churns out free energy for decades. And even if you decide to use a solar loan, the loan terms will be more favorable than what you’ll get from the utility, and you’ll still eventually pay it off.
You choose the size of your solar system
You choose what you can afford and how much you want to invest. The number of solar panels is completely up to you. And whatever you choose, that determines how much money you’ll save each month.
If your panels produce enough power to replace 30% of your dairy farm’s energy, as a monthly average, then your power bills will be 30% less than today. If your panels produce 70% of your energy, your bills will be 70% less. You save money either way. But there’s no minimum required number of panels. You buy what works for you.
It begins generating power immediately
Energy efficiency upgrades take a lot of time to realize the benefits. Solar panels start working on day one. You go from depending entirely on the power grid to producing your own energy, in one day.
It generates power every day
Solar power never takes a holiday. It works on weekends. It works while you’re on vacation. It works whether your dairy cows are in the fields or in the barn. Yes, it still produces power when it’s cloudy (just not as much). No matter how much energy you’re using, your solar panels are producing clean energy.
There’s possible net metering savings
What happens if your panels produce more energy than you need on a particular day? The answer to this depends on where you live. Most states offer net metering. In that case, any extra power generated by your solar panels goes back into the power grid, and you receive a credit for it on your energy bill. So even if you produce too much energy now and then, you still save money.
If you live in a state that does not require net metering, you have two options:
- Make sure and buy a small enough number of solar panels that it will be unlikely you’ll ever generate extra power.
To figure this out, you’ll need to determine your peak daily energy use — what’s the most power you might need on a particular day? Then, what’s the most power your solar panels might generate? This would take place in the summer, probably, when you have the most hours of sunlight. As long as your panels won’t generate more energy than you’ll need in these extreme scenarios, you’ll never be sending free power back to the grid.
- Use solar battery storage
With solar batteries, you get to keep any extra energy produced by your solar panels. If there’s no net metering, this ensures you get the full benefit of your solar system, and get to use all the energy it produces. With batteries, any excess energy leftover from the day will get used during the night.
Federal tax credit
Currently, the investment tax credit (ITC) pays you back 30% of the cost of your solar panels, including installation. So if you spend $100,000 on solar energy, you’ll save $30,000 when you file your taxes. This dramatically reduces the time it will take to reach your payback period.
Only have a small tax liability? You can stretch it out over 22 years. So, in theory, you could enjoy 20+ years of no federal taxes. Need an instant cash boost? You may even be able to sell your tax credit (ask us about this!).
REAP grant
In addition to the federal tax credit, there are other ways to save even more. For dairy farmers and any other agricultural producers, you can apply for a REAP grant. These come from the Department of Agriculture, and can cover up to 50% of the cost of your renewable energy system.
Imagine getting a 50% REAP grant and a 30% federal tax credit. These are additive. You get both. That means you might only have to pay 20% of the cost of your solar installation.
This is how many farms are reaching their payback period in just a year or two.
Options for solar batteries
This was mentioned already, but even if you do have net metering, solar batteries can save you more money in the long run because you can store extra energy and use it during the night. This reduces the amount you’ll still need to get from the grid.
Solar battery storage isn’t right for every situation. But it’s worth talking about with your Ag Solar consultant.
What about other renewable energy systems?
In the winter, you’ll have a harder time producing as much solar energy. You’ll still make some, but your needs will still be high, and you’ll be producing less than in the summer. So, while you may be able to produce nearly everything you need to run your dairy farm’s air conditioning needs, you’ll have a harder time generating enough for heating in the winter.
But, what if you combined two types of renewable energy?
Ag Solar only deals with solar. But in addition to solar, you might be able to work with a wind power company. With wind energy producing more power in the winter, and solar more in the summer, this combination could result in near 100% freedom from the power company.
Solar is much easier to install than wind, in most situations, so you’d have to see if this makes sense for your situation.
What are the main challenges with renewable energy?
We just mentioned the main one.
Your power needs on a dairy farm will tend to be pretty consistent. Cows need continual milking. That means all the energy required to run that process has to be accessible, nonstop.
But solar doesn’t produce energy at night, and depending on weather, sometimes not as much in the day. Wind power is much more inconsistent.
What can you do to overcome these challenges? The solutions have already been given:
- Combine solar with wind — more methods of producing clean energy results in more reliable flow
- Use solar batteries
- Utilize the most impactful energy efficiency strategies
- Retain your backup power methods, such as propane and generators
- Don’t go for off grid solar power
Basically, as long as you stay on the grid, you’ll always have access to the power from your utility company. The difference is, with solar, you’ll need a lot less of it. If you’re paying $1000 per month for power now, wouldn’t it be great to pay only $100? You’re not going to mind.
And, energy efficiency improvements such as LED lighting can result in substantial energy savings, so you won’t need as much power to begin with.
Slash your dairy farm’s energy costs with solar power
Your single best strategy for saving big money on energy is to start producing your own power using solar energy. That, combined with tax credits and a REAP grant, can wipe out huge portions of your electric bills, and you’ll recover your investment within just a few years.
