A Century of Delicious Dairy Products

I love the classic dairy images in this picture from our groundbreaking: in the middle are two dairy farmers dressed up for the occasion, and on the right is a farm inspector from the state department of agriculture. At left is our local Dairy Ambassador, a high school senior chosen each year to lead outreach efforts for the Washington State Dairy Women. Over the years, many Dairy Ambassadors have been drawn from the dairy-family-heavy school that we attended, so it was great to have the current representative at this key Farm Power event.

The dairy industry has had to work increasingly hard to keep milk in the diets of consumers, using everything from Dairy Ambassadors to the "Got Milk?" campaign. Once literally at the center of life for most of the population, milk is now competing with a dizzying array of other products for attention on supermarket shelves. Per-capita consumption of all dairy products has stabilized during the past fewer decades but remains lower during the first half of the 20th century--down about a quarter. The average American now drinks a bit less than 25 gallons of milk a year, about a third less than at the mid-century average. Butter consumption has fallen even more steeply; during the first few decades of the century, Americans were each enjoying almost 20 pounds of butter annually (more than half of all milk was consumed in this form). Now butter consumption has fallen by 75% (and has, unhappily for our arteries, been more than replaced by margarine and other fats).

Fortunately for dairy farmers, cheese and ice-cream consumption have moved in the opposite direction: ice cream exploded in popularity after World War II, and moderation since then has been more than offset by increased interest in other frozen dairy products. The biggest story is cheese--Americans eat almost ten times as much cheese as they did a century ago. Lest anyone attempt to blame this for American health problems, it is important to note that our cheese consumption still noticeably lags many healthy European countries. For example, the French not only enjoy more fluid milk and butter than Americans--they also eat 50% more cheese than we do!

Milk plays an important role in many food cultures, and we hope that Americans continue to appreciate the delicious variety of foods provided by our dairy farmers. Milk fits easily into a healthy lifestyle and links consumers to a sustainable local food production system. Milk drinkers should be asking where a store's dairy products come from--we'll be proud to tell them when their cheese, sour cream, and butter comes from Western Washington farms.

Construction Pictures

For anyone wondering whether our groundbreaking was ceremonial or real, the answer can be found on on the Farm Power website or on a photo page set up by one of our supporters. We didn't waste any time starting construction; Western Washington will keep getting wetter until sometime next spring, so now is as good a time as any in the next six months.

The concrete forms will start being set next week, and work will continue as the weather permits. Pumps are set up to keep water from soaking the site too badly. Once the floor is poured, work on the walls can proceed without getting as muddy. Check in with us before stopping by--it is a work site with heavy equipment, so visitors need hard hats and someone to escort them, but we'd be happy to show you around.

Will we make a difference?

Now that construction has started and some pressure has shifted to our contractor, I can get back to reflecting on the bigger picture. When we are up and running, our $3.5 million project will produce up to six million kilowatt-hours of electricity annually. That's almost unnoticeable in the utility world--about one day's output from a typical natural-gas-fired power plant.

However, to get that much power from another renewable resource, you would need one large wind turbine (like the Vestas V80 above, one of many on PSE windfarms) or a few acres of photovoltaic panels. A 1.5MW+ wind turbine would cost about the same as our anaerobic digester, but it would have to be located somewhere in the southeast quarter of Washington to produce its full potential. A solar photovoltaic installation could be located in Western Washington, but it would have to extremely large and spectacularly expensive to produce six million kWh each year--30,000 panels costing at least $40 million to install. Moving the installation to California or some other sunny location would cut the size and cost in half, but solar is still the priciest option.

So manure power will make a difference in Western Washington because we have few options here for renewable energy. But more importantly, a digester does much more than just collect the sun's rays or spin in the wind; our project will also be providing free cow bedding to dairy farmers, cutting methane emissions, and reducing manure odor. In the future, we may find valuable uses for all of our extra hot water or discover some new service that we never even imagined the system could do. An anaerobic digester is the Swiss army knife of renewable energy, and we can't wait to get ours up and running!

Groundbreaking

One of the reasons I haven't posted anything during the last month is that we finally broke ground on our first project! About 140 people came out and celebrated with us on October 28th, one of the last sunny days of autumn. It was a great crowd--a mix of farmers, politicians, investors, government officials, neighbors, and other supporters.

We kept the speeches to less than half an hour, but we still got to hear greetings from the governor--brought by her husband Mike Gregoire--and encouraging words from Congressman Rick Larsen, state senator Mary Margaret Haugen, and Puget Sound Energy's Andy Wappler.


We also fit in three separate check presentations, including one representing our loan from Shorebank Pacific shown in the bottom picture. Afterwards, people stayed around to talk for another hour and finish off the snacks, making it a full afternoon.

The Capital Press talked to a bunch of people and ran a great story on the event. We also were mentioned on KPLU the day before and finally made it into Sustainable Industries Journal a few days later. We hope everyone who attended enjoyed the groundbreaking as much as we did; check back for all the postings I skipped during this exciting period!

Harvest

I have spent much of the last two days helping a dairy farmer friend chop corn silage. Despite a cold spring, the corn turned out pretty well--forming a ten-foot-high wall in the picture above. This field is over half a mile long, so harvesting consists of the tractor chopping three rows of corn going east, then skipping over to another gap and chopping back west. Half an hour later, the tractor is back where it started and one acre of standing green corn has been turned into 20-25 tons of silage.

I was enlisted to help move all this tonnage. The farm truck above holds 6-7 tons of silage, so after about half a row was chopped I would back up next to the tractor, which would dump its wagon into the truck. Laboring in second gear, I then drove each load to the silage bunker at the farm a few hundred yards beyond the end of the field. Another truck, boasting two rear axles and substantially better loaded performance, alternated in the hauling.

So why the trucks? Well, harvest is that fascinating time where one gets a glimpse of the essence of farming. The window for chopping corn silage generally lasts less than a month; dairy farmers want the corn to have matured as much as possible but don't want it to get too dry. During this window, autumn weather starts to intrude on the harvest schedule, and then there is always the threat of the chopper breaking down. So the key is to have the tractor chopping as much as possible rather than hauling wagons of silage back and forth. Unlike most other occupations, poor timing doesn't simply mess with one's vacation schedule; in dairy farming, missing harvest time can have a substantial impact on the quality and quantity of feed available for the cows during the rest of the year.

All this work consumes quite a bit of diesel; the rule of thumb is one gallon per ton of silage, although we were working close enough to the farm that this field's consumption was lower than average. Fortunately, a ton of silage can provide half the diet of a hungry Holstein for an entire month; during that month, our silage-munching cow will produce up to 300 gallons of milk. Finally, the feed that isn't digested returns as manure to completely fertilize the field for next year!

Speaking of our favorite natural fertilizer, we were mentioned in the most recent print version of Manure Manager magazine--it was just a repeat of the Puget Sound Energy press release from this spring, but we are still happy to make it into ag-focused publications. Dairy farmers don't typically read green-future-envisioning magazines like World Changing, so we need to meet everyone where they're at.

The Market Value of Carbon Offsets

On the same day as a historic stock market collapse, we get news of a successful auction of the right to emit carbon dioxide. The Regional Greenhouse Gas Initiative (RGGI, or "Reggie") announced that last week's sealed-bid auction sold all the available CO2 emissions allowances for $3.07 per ton; this was the first chance for power plants in the ten Northeast states that participate in RGGI to buy allowances. RGGI becomes mandatory in 2009, and there will be thirteen more auctions before the first real accounting in early 2012.

This auction is also historic; although Europeans have been trading CO2 in a massive mandatory market for several years, those allowances were initially given away. RGGI only covers power plants and seeks to merely cut emissions 10% below current levels by 2019, but it can now claim the world's first CO2 auction.

Voluntary CO2 markets have existed in the United States for several years. The Chicago Climate Exchange set up a trading mechanism for greenhouse-gas reductions, but it has been buffetted by the inability of the federal government to make any progress on climate change legislation. Instead, regional organizations like RGGI and the California-led Western Climate Initiative have taken the lead, causing uncertainty over standards. Each region plans to regulate different industries and emissions, measure by varying methodogies, and reach independent goals. Meanwhile, some leaders continue to call for a carbon tax instead of a market for emissions.

At Farm Power, we will be reducing methane emissions from manure storage. Methane has at least 21 times the climate-changing power of carbon dioxide, so our reductions will be significant. We spent quite a bit of time last year exploring a sale of our reductions into the RGGI market, which allows power plants to buy a small percentage of offsets from projects like ours rather than buying allowances at auction. However, the RGGI offset system had yet to fully mature; we now expect to sell into the voluntary market for quite a few years until the alternatives become clear.

For today, we congratulate RGGI for pulling off its auction. The price stayed above the minimum, and now speculators have a new currency to trade in--a toast to the free market!

Bainbridge Graduate Institute Sends out Fifth Class, Welcomes Seventh

I received my MBA from Bainbridge Graduate Institute (BGI) in June 2007, when we were already well into the development of Farm Power. I visited regularly during the next year but didn't make it to graduation this June; fortunately, BGI just put out a newsletter with stories about the event which sent the fifth class out into the world.

This month, a seventh cohort of "change agents" is beginning its sustainable business education journey; the orientations have ended and the first round of classes takes place this week. BGI welcomes its largest class ever, and the excitement is contagious--as graduation speaker Van Jones said, the world is waiting for the students and their ideas.

And the media coverage update: the BGI newsletter included an article called "From Poop to Power", but more eyes probably saw an article on our grant in the Capital Press. This is just one more illustration of the different worlds Farm Power lives in; it is difficult to imagine two groups of readers more different than those who get the "The Circle" from BGI and those who read the west's weekly agricultural newspaper, but we love them both!

She's our state senator!

Most farmers in Skagit County call themselves Republicans. A mix of business and social issues make them at home in the GOP, and their fields often host campaign signs for Dino Rossi and other Republican candidates. However, several of these same fields also host large signs for State Senator Mary Margaret Haugen (D-10th), a longtime supporter of agriculture. Skagit County farmers are not stupid; they know that having a powerful friend in the Legislature trumps party ideology.

A conservative political action committee has targeted Mary Margaret with a TV attack ad on the standard script--"Democrats spend lots of money". If these tactics succeed in propelling political newcomer Linda Haddon into the Legislature, the 10th district will suffer a huge loss. Why? I'll let the Haugen campaign explain with its "respected and effective" advertisement, found on YouTube here. In the first seconds, you can see Mary Margaret walking with the farmers who will be hosting our digester.

Our state senator was the primary sponsor of almost one hundred bills during this last legislative session; several of these aided agriculture, while others addressed issues important to a wide range of 10th district voters. As the chair of the Transportation Committee and a senior member of the Democratic party which controls (and will continue to control) the Legislature, Mary Margaret can get things done. People of both parties in Skagit County appreciate her effectiveness.

The best money the federal government spends

Most grants--both private and federal--fund studies, program development, and similar activities. However, the U.S. Department of Agriculture has a Renewable Energy and Energy Efficiency program that awards grants for actually installing green power systems or high-efficiency retrofits. The program originally awarded $23 million in grants annually; more recently, some of the money has been shifted to funding loan guarantees. Midwestern states have aggressively pursued this USDA funding, and it has enabled the construction of dozens of anaerobic digesters.

From the beginning, we planned to make a renewable energy grant a part of our funding package. We applied for the maximum grant--along with two loan guarantees--in June and settled in to wait for the USDA to its work. In most years the results came out in September, but things moved more quickly this year--awards were announced on August 27, and Farm Power received its full $500,000!

We were the only Washington recipient--actually, the first award to the state since 2005--so our Congressional delegation was happy to hear that their letters of support helped; Congressman Larsen's office put out a press release. Now if Congress would just pass an extension to the Renewable Energy Production Tax Credit.... The Skagit Valley Herald ran another little story and various supporters celebrated; we actually got the news during a day-long series of meetings in Whatcom County, so we were too tired to do much! I guess we'll just celebrate in a couple months when we're actually building.

Low-cost producer?

I wrote in an earlier post about the rising cost of coal; that market seems to have cooled off a bit in recent weeks, but then I saw an article from the Northwest Energy Coalition on the total cost of generating electricity from coal. Rapidly-rising prices for boilers, turbines, and other industrial equipment has driven up the fixed cost of large generating plants (those typically burning coal or uranium), as seen in the above chart drawn from the article. In comparison, the increase in wind turbine prices we've seen over the past several years hasn't had nearly as large of an impact on the cost of generating electricity from wind, since fixed maintenance costs haven't risen--and variable fuel costs are nonexistent.

All of these calculations ignore the potential cost of carbon regulations. A $20-per-tonne-CO2 price would add another penny to the cost of a coal kWh; the impact on natural gas generation would only be a third of a cent, while wind and nuclear would look even more attractive. Check out this brilliant spoof advertisement on the joys of coal; ironically, coal may not even be the lowest-cost option anymore!

"Methane Power Team Cautious on PUD"--Skagit Valley Herald

The Skagit Valley Herald ran a front-page story on Sunday that finally linked our project with another issue--proposed public (PUD) ownership of the county's electrical system; the first few paragraphs of overview are available online (with the more in-depth section unfortunately limited to subscribers only).

Our local public utility district has pitched its bid to take over the electrical system as a win-win initiative that will cut power bills while also defying Puget Sound Energy's plan to sell itself to Australian investors. Almost as an afterthought, PUD leaders also claimed on several occasions that they would be better supporters of green power as well.

I detailed our doubts on PUD support for green power in a March posting; more recently, we have been attending public forums where we have continued to contrast Puget Sound Energy's proven record on renewable energy with the less-enthusiastic support from government-run utilities, most notably Snohomish County PUD. Almost everyone likes the idea of local renewable energy, but we still don't seem to have convinced the pro-PUD side to grapple with the green power reality--it's not free, and developers don't start projects just based on nice words.

Local renewable energy simply does not happen without active, tangible, and bankable utility support. We have been working closely with Puget Sound Energy's green power team for almost a year and a half; they offer a regulator-approved contract that will pay about eight cents for every kilowatt-hour we will produce between now and 2018. This is the sort of support that convinced Shorebank Pacific to make a large loan commitment for our project; only at this level of support can anyone justify investing millions of dollars in a manure digester. For the sake of energy consumers, farmers, and local economies, we hope the Northwest's utilities will all follow PSE's lead and take clear action in support of green power.

Different cows, different impact

I noticed an article in E--The Environmental Magazine last month called "Meat of the Matter", focusing on the global-warming impacts of the livestock industry. Oddly, while the article brought out a lot of numbers it did not include a single photograph of any disturbing meat-animal production facilities (like the feedlot above). Rather, "E" chose to include several pictures of cute Holstein dairy calves. The magazine may be trying to keep the visual material light, or it might be kicking off a broad campaign against all farmers with cattle, or perhaps obtaining stock photos was easiest for Holsteins. Whatever the reason, I need to respond to the implication that dairy cows (and their care) are no different than the beef cow industry.

It is a fact that Americans eat vast quantities of meat, and this leads to the butchering of about 30-35 million cows a year; more red meat slaughter data than you'll ever need is found here. About three-quarters of these cows were raised for the sole purpose of becoming meat, and those in the beef business use breeds like Herefords, Angus, or Limousin. Beef cattle often spend the first part of their lives on grass, but almost all of them stand in feedlots for their final few months. Feedlots push grain through their cattle and move them on to the slaughterhouse when they are 15-20 months old. Once again, about 75% of our beef comes from cows raised with the specific goal of turning them into steaks.

Dairy cows, in contrast, make up a tiny fraction of our hamburger supply--about seven percent. Holsteins are raised with the goal of producing milk for many years; some of them don't produce very effectively and are eventually sold for meat, but every dairy cow at least gets a chance to have a calf and live to a minimum age of three. The average Holstein lives about five years, and they do so far more naturally than beef cows.

One of the accusations leveled at the livestock industry is that it feeds vast quantities of grain that could be better used to feed people. While this may be justified for beef producers, dairy cows eat diets consisting mostly of forage--various grasses, chopped green corn, and hay. This diet matches up much better with their digestive systems than grain, and forages also require much less work to grow. Since dairy cows need to chew their cud in order to convert all that forage into energy, farmers make sure that they are comfortable enough to spend at least a third of their time lying down and "ruminating". Beef cattle that eat mostly grain don't chew much cud, and thus their comfort becomes much less of a bottom-line issue for the meat industry--witness the feedlots of the southern plains.

One final question: if we admit that some animal protein belongs in our diets, is dairy any more efficient at supplying it than beef? To start, meat averages about one-quarter protein by weight, while milk is a bit more than 3%. Slaughtering a beef cow yields about 800 pounds of meat, while milking a dairy cow for three years produces at least 60,000 pounds of milk. So dedicated beef production results in 200 pounds of protein per animal, while dairy production results in almost ten times as much.

So, don't blame the iconic black-and-white dairy breed for the hundred million other cows that exist solely to feed America's hunger for beef. Don't blame dairy farmers for the inefficient use of grain to get beef cows to slaughter weight quickly. And finally, don't blame dairy farms for methane emissions from manure--they have been leading the way in adopting anaerobic manure digesters, and the farms of Skagit County will soon be among them!

Presenting in Anacortes on August 13th

In this new era of melting polar icecaps and skyrocketing energy prices, some citizens from our county got together and formed Skagit Beat the Heat. This group has been working to raise awareness of climate change and ways to slow its impact. Now Beat the Heat has invited us to present at their August 13th meeting, at Village Pizza in Anacortes (downtown at 807 Commercial Avenue) starting at 6pm. The meeting is open to the public and any of our other supporters are welcome to show up, especially if they happened to be searching for local groups doing something about global warming!

We are redoubling our efforts to get out in the community, so look for us at various events--it being an election year helps too. I'll also be posting more in coming days, as our schedule has finally opened up after a July full of important dates. Watch this space!

Now we have a problem

Most of the time, the weekly coal price update from the Energy Information Agency isn't all that interesting. However, in recent months the spot price of eastern low-sulfur coal has broken loose of its historical range and rocketed up into new territory. This is a problem because utilities have been counting on coal to keep providing cheap power while the price of natural gas bounces around. If coal isn't cheap, the price of electricity can no longer be held in check. The legendary mines of Wyoming's Powder River Basin are a thousand miles from anywhere, and the trains hauling that coal use a lot of diesel--high energy prices have pushed through the final line of defense. Now we have a problem.

Conventional Milk is Good Milk

Most of the dairy farmers in Western Washington proudly produce "conventional" milk; in practice, they use fertilizer on some of their crops and treat their cows with antibiotics if they get sick. I've seen a few of these farmers get quite upset about organic milk marketing implying that they don't treat their animals well; they see unwillingness to use antibiotics on sick cows as inhumane and prohibiting fertilizer as a recipe for inefficient land use. This letter on organic or "rBST-free" milk shows the position that many dairymen take, but now even Darigold--their own cooperative--is banning rBST. The trend towards locally-sourced food may push consumers back towards our farmers; most national organic brands (with the exception of Organic Valley) actually get their milk from tenuously-certified suppliers like Aurora. We invite our readers to visit the Western Washington farms and meet the farmers; after that, they will be proud to drink their milk!

So, how about those energy prices?

Unless you've spent the last six months in a cave, you've probably heard about the run-up in oil prices. Fewer people, however, have paid attention to natural gas. The chart at right shows the January 2009 natural gas contract, which had reliably traded at around $9/MMbtu until late this winter; for months, I would check the contract each day and considered anything above nine dollars to indicate strong demand.

Those whose job it is to look at the future aren't much help, since they use the past as a guide; unfortunately for them, the energy markets seem to have departed from historical trends. The Department of Energy's "Short Term Energy Outlook" bravely predicts natural gas prices in the $11/MMbtu range through 2009 (somewhat below both current spot and forward levels). The STEO from a year ago (pdf) predicted that 2008 prices would average just over $8.00 (so far, only a few weeks in January got under that price), so clearly no one wants to be the one to introduce a truly scary future scenario.

With higher oil prices, people will drive and fly less, reducing demand and moderating prices. Things may work differently for natural gas, since less natural gas use is discretionary--we don't relax by leaving all the lights on in the house overnight or turning the heat up to 80F. In an earlier post, I discussed natural gas usage in the electricity-generation and fertilizer-manufacturing business. Beyond those and other industrial processes, the vast majority of natural gas is used for space heating and hot water; demand for both may fall, but not immediately and not without substantial adjustment. We have the privilege and the curse of living in interesting times!

Come to Lynden on May 28th!

Anaerobic digesters are not very photogenic, but we still think they are interesting to visit. Washington state's first manure-to-energy project went online in 2004 at the Vander Haak farm near Lynden. We have visited the digester a half-dozen times and keep coming back, bringing new guests each time. Having this project so close makes it much easier for us to show various stakeholders that the technology works. So we want to invite our readers to tour the Vander Haak digester on Wednesday, May 28th. Give us a call at (360) 424-4519 or send an E-mail to farmpowernw@gmail.com for more information. We hope to see you there!

A Real Press Release

We have never doubted the support of Puget Sound Energy during the year we have been working with them. Still, we appreciated their willingness to sign a Memorandum Of Understanding to help convince other people they wanted to buy our power. In the spirit of good feeling, PSE also prepared a press release that went out on the wire today. It was picked up by a number of local news sources (even getting 15 seconds of airtime on Northwest Cable News) and we've heard from some people who probably would never known about us. This worked a lot better than doing our own press release!

Farm Power Turns One

Today marks Farm Power's first anniversary--after a full day of visiting dairy farmers on April 10, 2007, we put our signatures on paper to found the company.

It is fitting that after almost a year of steadily-increasing visibility, we gave our first presentation that was completely open to the public. The photo above shows the nice little group that turned out to hear us at the Rexville Grange on March 27. At the state and national levels, the Grange advocates for farmer-friendly policies; that night, a mix of neighbors, friends, and members just showed up to learn more about local renewable energy. The Grange hall is located only about a mile away from the site of our first project, which will be owned by our appropriately-named subsidiary Farm Power Rexville LLC!

We have been presenting to other community organizations, most recently two different Rotary clubs. However, the Grange seems to most closely match the Farm Power vision, so it is the first organization that we have actually joined. The Rexville branch doesn't have a website, but any interested readers can send a note to their account: rexville_815 (at) yahoo (dot) com. For our younger readers who prefer membership in virtual organizations, Farm Power now has a Facebook group; I'll be posting updates regularly there too.

Democracy!

Governor Christine Gregoire signed SB 6806 today--let the digester construction boom begin!

Once again, we want to thank Senator Mary Margaret Haugen and her staff for doing all the heavy lifting down in Olympia. Thanks also to all our supporters who contacted their legislators about the bill. This is how democracy works.

All Politics Is Local

Skagit County is governed by a board of three commissioners; the sole Republican commissioner has decided to retire, so local dairy farmer Ron Wesen stepped into the race to succeed him. We know Ron as the head of the county Dairy Federation and also as a member of the extended Wesen dairy family. Four brothers and their father produce both conventional and organic milk from two different herds at two neighboring farms, the only local operation to do so. Since dairy families make up only about 0.1% of the population of the county, we're pretty excited that Ron has decided to run for commissioner.

I'm a progressive Democrat while my brother is a libertarian-leaning Republican. When it comes to local agriculture and renewable energy, however, parties become much less important. Unless the two Democrats running opposite Ron turn out to be impeccably pro-farming (one's a developer and the other works for a city sanitation department, so....), I'll be voting Republican in this race. In the same way, our state senator Mary Margaret Haugen (D-10th) has been one of our strongest supporters and my right-wing brother will be voting Democrat for her in November.

Two months ago, Senator Haugen introduced SB 6806 to provide tax incentives for anaerobic digesters; in early March, the bill passed the Senate 46-0 and the House 96-1. Even in Olympia, support for farming and green power can cross party lines. We will be driving down to the capital on Monday to watch Governor Gregoire sign the legislation; the first beneficiaries of the tax incentives will be two dairy farmers who currently operate digesters, most likely Republicans!

Eventually, we hope that the political support for anaerobic digesters will stimulate the construction of many more than the one that Farm Power is currently developing. Local agriculture, renewable energy...who can be against this stuff? When politics happen where you live, things get done.

Is Public Power Better?

Several weeks ago, the normally quiet world of utilities vaulted onto the front page of our local paper. The issue is whether our Public Utility District, currently only providing water, should get into the electricity business. One article in the Skagit Valley Herald, "Public or Private", mainly contrasted the local governance of the Skagit PUD with the international ownership of Puget Sound Energy, an investor-owned utility that is being taken private by the Macquarie Group. Macquarie hails from Australia, and its acquisitive desire is apparently driven by compulsory pension investment laws Down Under. Beneath the ownership issue simmers general unhappiness with recent PSE rate increases and--very likely--the impression that public power provides better service at a better price.

Puget Sound Energy's territory wraps around two major publicly-owned utilities: Snohomish County PUD and Seattle City Light. Both of these provide electricity for less than PSE--SnoPUD's rates are about half a cent less on average, while City Light saves its customers almost two cents per kWh. Why is this? In short, public utilities have better access to heritage electrical resources. Heritage resources consist mainly of hydroelectric dams, ridiculously inexpensive sources of power constructed during a mid-century building boom which will never be repeated. The Bonneville Power Administration, a federal agency, controls half of the Northwest's hydroelectric dams; federal law requires the BPA to give priority to public utilities and cooperatives.

For many years, the BPA produced so much power that it could supply the PUDs and have plenty left over for investor-owned utilities. However, hydroelectric assets remained finite while the Northwest's population grew. Competition for the power increased, and last year public utilities even took the BPA to court to force it to charge higher rates on some power it sells to its private customers. Unfortunately, most public utilities have done little to develop their own generating capacity as power demand crept up towards their BPA allotments, and no amount of court rulings will conjure up this capacity.

Seattle City Light will be able to weather the upcoming power crunch for a while, since the utility gets half of its power from its own heritage hydro projects. However, this security also means that City Light hasn't pursued new renewable capacity with much vigor.

Snohomish County PUD is in worse shape than Seattle City Light; SnoPUD gets 80% of its power from the BPA, and neither of the generating stations it actually owns have much flexibility to adjust to future loads. Faced with dependency on the open power market, SnoPUD finally decided to try acquiring renewable energy with a Request For Proposal in the fall of 2007. The RFP disappeared off their website several months later, and it remains to be seen whether the PUD's late arrival to the power acquisition party made the proposals too tough to swallow.

In comparison, Puget Sound Energy has been aggressively purchasing both renewable and gas-fired capacity. During the past three years, two new wind farms have added almost 400MW of capacity and two gently-used combined-cycle gas turbines added another 400MW. PSE also began buying the output of the pioneering VanderHaak anaerobic digester, while SnoPUD resisted making a deal for a similar facility proposed by Qualco Energy.

We at Farm Power have developed a great working relationship with Puget Sound Energy; trends at nearby PUDs suggest that enthusiasm for projects like ours would probably decrease if Skagit County's electrical network was publicly owned. Since PSE will be heavily regulated by the Washington Utilities and Transportation Commission even under new ownership, we prefer staying with our current cow-power-friendly utility.

Energy Markets

Natural gas futures fell about 8% today across the entire 12-month forward strip, while oil fell at least 4% for the same range. Even in energy markets, these are pretty volatile price moves. The big sell-off may reflect recession fears, unwinding of speculative positions, or new supply data--I don't know which. We do watch the long-term trends, though, since both oil and gas prices affect Farm Power. Fuel costs impact our farmers in many ways: milk haulers raise their rates, tractors cost more to operate, and the general population has less money to spend on cheese. High oil prices function as a sort of tax that cuts even further into the precarious dairy profit margin. However, it is the price of natural gas that sets the boundaries for profitable operation of anaerobic digesters, Farm Power's core business.

While hydroelectric, nuclear, and coal plants provide baseload power, the primary fuel for the final kilowatts added to the grid is natural gas. Electricity production consumes roughly one-quarter of all natural gas delivered in the United States. Modern gas-fired power plants can achieve around 50% efficiency with low maintenance demands, so we can figure the price that utilities pay for their marginal power with a simple formula based on the cost of natural gas. Anaerobic digesters were not economical in the late 1990s, when gas turbines could produce power for less than $0.03/kWh. Today, we know the utilities are facing costs at least double the levels of ten years ago; we have seen corresponding increases in the rates paid to digester projects. Power from heritage hydro, nuclear, and coal is just as cheap as ever, but high natural gas prices have completely changed the prospects for renewable energy.

Natural gas influences agriculture directly through fertilizer production. Almost all of the world's nitrogen fertilizer is synthesized from the air with the help of copious quantities of natural gas--around 3-4% of global production. The United States imports much of its fertilizer from natural-gas-rich regions like Russia and Trinidad & Tobago, outsourcing the demand for raw gas, but the fertilizer prices still move with North American gas demand. The most popular nitrogen products have tripled in price. Since anaerobic digesters can break down more than just manure, co-digestion of nitrogen-rich food processing remnants starts to make a lot of sense. Fossil fuel price volatility should not be allowed to wreak havoc with our food supply, and Farm Power will do its part to help agriculture through this time.

Community Visibility

February has been a busy month at Farm Power, especially in our relations with the wider community. During December and January, our only real visibility came from a mention in the newspaper and brief testimony at a hearing on closing a rural railroad crossing. However, at the end of January we took an interest in the legislative session and rallied our many supporters to contact our lawmakers. We won't know the results for another week, but the support from the Skagit County Commissioners, Northwest Farm Credit Services, Skagitonians to Preserve Farmland, Skagit State Bank, Western Washington Agricultural Association, and others was very gracious and much appreciated.

In the middle of the month, we received great exposure at the annual dinner put on by the Economic Development Agency of Skagit County. Despite still being in the development phase, we were featured on a poster and in the president's presentation alongside successful local businesses. We made some new connections and linked up again with other leaders in our community.

The visibility continues in March. We will be talking about Farm Power on Thursday, March 27, at 7pm in the Rexville Grange. The grange is located just behind the Rexville Grocery, just south of our partner farmers (who are in turn just south of Skagit Valley's major tulip growing areas). We invite our readers to come meet us. Make it an evening outing by touring the fields of West Mount Vernon beforehand. We hope to see you there!

Washington Energy Spending

Food versus Fuel?

Developing Farm Power makes us spend a lot of time with numbers, both in our projections and in the performance of other systems. When I compare anaerobic digesters to other types of land-dependent renewable energy, I continue to find that our numbers look far more sustainable than the rest. The food-versus-fuel debate has been driven mainly by critics of corn ethanol, but emerging ag energy sources could actually end up being worse. In comparison, manure digesters create energy while actually strengthening food production--I'll show that in numbers below.

Corn Ethanol=500 gallons per acre (net 35 MMbtus of final energy)
I have little love for ethanol, but in fairness I must bring up two points. First, ethanol production leaves behind at least a quarter of the nutrient value of corn. One acre of Midwestern corn yields about 150 bushels, which modern plants can convert to ethanol at rate of 2.75 gallons per bushel. We now have 400 gallons of low-density motor fuel, but we also have over a ton of high-density animal feed, replacing a quarter-acre of forage that would otherwise be planted. So ethanol gets a 25% bonus for leaving some food value.

Second, many ethanol plants are owned by the communities that supply them with corn. The same interest in self-reliance that sparked the formation of ethanol co-ops now drives efforts to replace natural gas with biomass for creating process heat. For that reason, I don't subtract process energy from the net final energy; I do, however, subtract a couple million btus per acre for fertilizer production, as corn is so nitrogen-hungry that even the best crop rotations still require extra N.


Energy Crops to Digesters=7.5MWh per acre (65 MMbtus intermediate, net 25 MMbtus of final energy)
This is quite common in Europe; taking the animal out of the loop allow digesters to get the full value of corn silage rather than just the leftovers. The digested liquid fertilizes the next season's crops, making a neat closed loop; unfortunately, food production is completely displaced.

Schmack Bioenergy's Pliening biomethane plant in Germany cleans up biogas and injects it into the natural gas grid for use at distant power plants. The plant consumes about 40,000 tons of silage per year, requiring at least 2,000 acres of corn and other forage crops. Germany pays such high rates for renewable energy that this sort of scheme makes sense even though the linear process yields no other benefits. For certain countries, Food versus Liquified Natural Gas from the Middle East to Keep Warm in Winter might be a debate that food occasionally loses.


Cellulosic Ethanol/Biomass Gasification=?
Range Fuels may be closer to finding the energy holy grail George Bush introduced to the country two years ago, but until the technology actually becomes commercialized we won't know much about how efficient it is. Everyone seems to agree that the final energy yield of a ton of biomass will be considerably lower than a ton of corn, so the process had better be much more efficient. No one has developed such a process to date.


Crops to Dairy Cows, Manure to Anaerobic Digesters=1.5MWh per acre plus six tons of milk (5MMbtus of final energy, to be enjoyed with plenty of cheese and butter)
The main difference between feeding corn to ethanol plants and feeding it to dairy cows supplying a manure digester is that the byproduct of the latter process is edible to most humans. To this point in history, ruminant animals have been our most efficient way of turning cellulosic biomass (or grass) into usable energy (or fats, proteins, and carbohydrates). Dairy production falls short of soybeans in raw protein yield per acre, but having animals closes the fertilizer loop and--after adding anaerobic digesters--produces energy as well. Here's the basic calculation: the 5-7 dry tons of forage from one acre, when fed to a comfortable cow, turns into milk and at least twenty wet tons of manure. Wet manure, when fed to an anaerobic digester, yields a half-million btus of biogas per ton, which is combusted for green power.

The number of acres of corn planted for ethanol and the number of acres planted to feed dairy cows will be roughly the same in 2008 (almost 20 million). Wouldn't you rather have a cold glass of milk with your renewable electricity rather than some moonshine with your commute?

A Legislative Strategy?

It's been a busy week at Farm Power. On Monday we woke up to several inches of snow but proceeded to drive down to Olympia where we testified in support of Senate Bill 6806 at an Agriculture and Rural Economic Development meeting. Our state senator, Mary Margaret Haugen (D-10th District), introduced this bill after staff members we've talked to spotted an easy election-year issue in extending a six-year property tax breaks to anaerobic digesters (only biofuels manufacturers receive it currently).

We spent over an hour waiting for a line of agricultural spokesmen to comment on another bill designed to study a potential farmland/habitat program, and then we waited for an engineer to explain his company's new tire-filled digester design to the senators. By the time we took over the stand, the room was noticeably emptier than earlier. We gave the committee a comparatively high-energy presentation, however, and readers can watch online at TV Washington by skipping over the first 1:14:00 of video.

Our friends from the Dairy Federation had already left for their lunch dates, but we did get support from a Puget Sound Energy representative. The bill will get some fiscal analysis before the committee votes on it; we hope any amendments will prove easy to add and help the bill move easily into the full Senate, also picking up a companion bill in the House. This year is a short legislative session, so few of the ideas introduced will actually get anywhere, but our senator has enough pull to move things along and the timing for renewable-energy/climate-change legislation is good.

After leaving the state capital, we continued south to the Harvesting Clean Energy conference in Portland. This wasn't as relevant to our business as the AgSTAR conference two months ago, but it gave us a chance to bond further with people from the USDA (who will be helping us with our $500,000 grant application) and state agencies (who will be working with us on regulatory issues). We returned home Tuesday night quite weary; maybe we will be called down to Olympia again, but hopefully not too soon--we like being in Skagit County!

Do farmers deserve a middle-class income?

I started reading Barbara Kingsolver's
"Animal, Vegetable, Miracle" last week and have been thoroughly enjoying it. However, I have noticed its critique of mainstream agriculture is not paired with empathy for average farmers, such as found in other books such as "The Omnivore's Dilemma" (post on that book to come).

Here's an example: Kingsolver's husband Steven L. Hopp steps in on page 76 to write approvingly about the supposed advantages of micro-agriculture: "Small farms less than four acres in size had an average net income of $1400 per acre. The per-acre profit declines steadily as farm size grows, to less than $40 an acre for farms above a thousand acres. Small operators have to be both grower and marketer... They're doing everything right, they just need customers..."

The thing that stands out right away is that the income from a four-acre farm makes a minimum-wage paycheck look pretty attractive. If this is the definition of a small farm, then the only people who can afford them either work other jobs, receive pensions, or are simply independently wealthy. As the USDA chart above shows, these people regularly put in hundreds of hours of unpaid work or write off the value of the land.

It's only the much maligned "big" farmers who seem to actually worry about things like paying off mortgages or earning a living. Fortunately, most of those who farm hundreds of acres or work with hundreds of animals have managed to survive on their incomes as full-time farmers. And that's good news for us: if our flour all came from four-acre wheat farms or our milk came from four-cow dairies, paying six dollars for a loaf or a gallon would suddenly become a bargain rather a guilt-assuaging indulgence.

Here in Skagit County, our organic family farms are mostly in the hundred-acre range, but they are able to sustain a respectable standard of living from the full-time work. Golden Glen Creamery on the north end of the Valley is not organic, but about 70 naturally-raised cows provide milk for a line of dairy products that support an extended family in a way that a couple of goats down the road from the Kingsolver cabin never could. Sustainable agriculture that doesn't provide a living for its farmers isn't sustainable; "Animal, Vegetable, Miracle" would have done better to celebrate farms that actually work.


In other news, we received a little more press in our local paper over the holidays when the Skagit Valley Herald made a courageous decision to annoy a large minority of its subscribers with a week-long front-page series of articles on climate change. Eventually we'll actually have enough developing that we can write a press release!

Will milk prices keep supporting farmer margins?

Even with historically high milk prices, dairy farmers aren't feeling too secure in their profitability. Input prices continue to rise, threatening margins. This can be seen most easily with corn prices.

Washington dairies do not depend on Midwestern corn. Unlike feedlot beef cattle, dairy cows primarily consume local grass or chopped-corn silage, augmented by alfalfa hay grown in drier regions. However, as grain prices have risen, crop farmers have shifted more of their fields to grain production with predictable effects on the availability of land for feeding cows.

Corn, soybeans, and wheat are all setting records this year. Corn futures on the Chicago Board of Trade are near the record of $5.50 a bushel set during the 1995-96 drought, and the chart of historical corn prices above shows that--in nominal terms--we are in new territory. Even here in Skagit County, winter wheat--a lowly rotation crop--is experiencing a boom as farmers contract for May prices quadruple the historical average. Landowners accustomed to earning a few hundred dollars per acre providing feed for dairy cows can rake in up to two thousand an acre by switching to wheat.

What is going on? The market seems to be driven by both American biofuels and international food demand. Almost a quarter of U.S. corn will be turned into ethanol this year, but strong exports have added fuel to the fire. Wheat does not have much of a biofuels role, so its price reflects a larger shift in worldwide carbohydrate needs.

At Farm Power, high grain prices will push our partner farmers into even greater reliance on their own land for animal feed. We have noticed increasing interest in our plans to increase the nutrient value of manure that we process, so we hope to start helping reduce feed production costs before higher prices really start to bite. Those farmers who have been adding extra grain to their cow rations will undoubtedly cut back, although milk production will suffer. As long as milk prices remain high, the transition won't be too painful; with a little luck, by the time margins start getting squeezed Farm Power will have its first digester running and provide a little more cushion. In the end, that's why we're here.