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!