Converting forages into dairy products for human consumption is a matter of energy that is increasingly costly and difficult to contain within shrinking margins for California producers.
The energy needed to move irrigation water and run Central California’s power-hungry farming operations and dairy facilities is a significant cost to the entire operation. Five-figure monthly utility bills can be debilitating when milk prices tank and the only cost-cutting measure left is to skimp on feed ration components.
If there is one thing California is known for is its sunshine, and what better way to reduce the high input costs of pumping water from 800 feet and powering a large dairy operation with 7,000 head of cattle than to tap a resource that regularly appears over the Sierra Nevada and sticks around for 8-14 hours depending on the season.
Lakeside Dairy was built in 2006 by brothers Mike and Manuel Monteiro, two third-generation dairy producers and Central California growers. After suffering through the larger economic downturn that continues to impact the state, and until recently sent milk prices crashing several dollars below the cost of production, Mike Monteiro said the necessity of solar was obvious to the business.
“We needed to figure out how to produce our own electricity,” Monteiro said. “After building the dairy and expanding it to full milk production I began to set my sights on producing our own electricity.”
Solar generating systems such as this were financially out-of-reach for the cash-strapped dairy, but thanks in large part to federal and state financial incentives and an Ag lender willing to work with him, Monteiro was able to have a turn-key system installed with no money down.
“Financially it didn’t make sense for me to go out and put in solar,” Monteiro said. “For me the finances had to work; even if it was merely a break-even option in terms of my return I saw it as a good investment.”
Monteiro continued: “I needed assistance to purchase the system, which fortunately was available through the federal government and the state.”
The $3.5 million project was kick-started with a 30% federal grant aimed at helping producers develop green energy sources. Monteiro was able to make the project further attractive to his Ag lender, Rabobank, by showing a 15-cent per kilowatt hour (kWh) direct payment from the State of California for five years. Monteiro receives a monthly check for his power production from a program called the California Solar Initiative (CSI).
Together, the monthly check from the CSI program and the annual savings of about $160,000 in power costs was enough for Rabobank to loan Monteiro the money for his project.
“The benefits of solar are very attractive to agriculture,” said Greg Aguilar, vice president with the Clean Energy Finance and Leasing Department with Rabobank in Paso Robles, Calif. “Solar works well for Ag-related businesses like this because they have the space to install these systems.”
According to Monteiro, Rabobank has been an enthusiastic partner in his solar project because of the government incentives and the low maintenance costs when compared to other energy-generating projects such as methane collection and manure digesters.
“My first thought as a dairyman was to capture methane gas and run a generator to produce electricity,” Monteiro said. “I just wasn’t comfortable with that scenario because of the amount of emissions those generators were putting out. Solar is clean energy and my maintenance costs are next to nothing.”
As he continued to consider his power-generating options to reduce his input costs, Monteiro began to receive phone calls from investors looking to lease or buy space from him to install solar panels on his property. Some wanted to simply rent space in his farm fields; others were interested in leasing space on several acres of south-facing free stall roofs.
“When people kept calling and asking me about this that began my thinking to install solar myself,” Monteiro said.
SPG Solar of Petaluma, Calif. built and installed the green-energy system for Monteiro. Optimized with a solar tracking system that constantly orients solar panels to receive direct rays from the sun, hundreds of solar panels sit atop structures in an open field next to the dairy.
According to Dylan Dupre, vice president of sales with SPG Solar, the company has seen much interest in the system. Two other nearby dairy and farming operations in California’s San Joaquin Valley also have similar solar power systems installed. Several agricultural processing and packing operations have added solar to cut their input costs as well.
While California’s financial incentives were helpful in attracting grower buy-in of the technology, Dupre also believes California’s high energy costs were a significant factor in early-innovator adoption of the systems by California growers and agribusiness.
“It’s easy for us to show the economics of this in California,” Dupre said.
Monteiro says the solar generating system didn’t completely take him off the grid, but it does cover about 75 percent of his total electrical needs in a state where power costs can easily exceed 25 cents per kilowatt hour.
Power collected from the panels runs not only the dairy barn and the lighting in the numerous cattle sheds on the facility, but it also runs two of the farm’s wells, a manure separator, pumps for the flush systems in the free stall barns, all the lighting on the 140-acre dairy and the pumps for the drinking water on the dairy.
Monteiro has nothing but praise in working with SPG Solar. The company provides maintenance and monitoring of the system, plus a written guarantee with financial incentives that it will produce a minimum of 1.7 million kWh per year. If production levels fall below that guarantee, SPG Solar will pay Monteiro for the lost production.
Additional benefits of the system include maintenance warrantees of 10 years on the inverters and other equipment, and 20 years on the solar panels.
“There is no extra cost to me,” Monteiro said. “I like that.”
One of the additional benefits of the solar system in terms of cash flow is how net metering works in California. Pacific Gas & Electric, Monteiro’s power provider, bills him on an annual basis after factoring in his annual use and the power generated by the solar panels over that same period.
Monteiro sees this as a win-win for him and California as the state pushes power companies to generate more of their power from green energy sources, such as solar. California energy companies are under a mandate to produce at least one-third of their energy from renewable resources by 2020.
A next step for Monteiro is the issue of cap and trade credits for green energy production. Because he produces a green energy resource, Monteiro believes he may be eligible for credits under a system that allows energy users to use pollution-generating sources above a government-mandated level by purchasing green energy credits from those who fall below established levels.
“We’re wondering if we have some credits available to us, and how we can get paid for those credits,” he said. “I’m sure SPG Solar will let us know if something like that becomes available in the future.”