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.

When is it time for a break?

Dairy farmers have reason to celebrate this holiday season. Milk prices are at record levels and look to stay high well into next year. Although costs have risen substantially (driven by the doubling of corn prices), everyone is making money and catching up after a terrible 2006.

I am about ready to turn off this computer for a few days. Our schedule has been slowing down all week, redeemed only by a meeting set up by our friends at Skagitonians to Preserve Farmland. We keep pushing forward where we can, but sometimes it's difficult not to feel like we've already started a undeservedly long holiday break.

Our farmers don't have to worry about any such feelings. Cows require just as much care on Christmas as they do any other day, regardless of the plans of relatives. All entrepreneurs expect their work to displace leisure at certain points, but dairy farmers are among the few who know this will happen for the duration. When things get busy for us next year, we can only hope to match their work ethic. To all our friends, Merry Christmas!

Is Farm Power working in the right part of the value chain?

Before we founded Farm Power, some people urged us to find a quiet corner of the renewable energy world and start a little service business; this was supposed to let us gain experience with minimal investment before eventually leading to a real energy-producing opportunity. It would also give us time to find the millions of dollars needed to create a project, perfectly reasonable advice given our limited resources.

We didn't take it. From the beginning, we have believed that what the renewable energy industry needs is not more service providers but more actual owners. As long as we count the number of small utility-grade (100kW to 10MW) green power installations in Washington on one hand, we continue to see an implementation problem. So we dived right in and committed ourselves to a business model where we owned and operated multi-million-dollar anaerobic manure digesters.

Our local dairy farmers understand capital-intensive business and took us seriously from the beginning. Their industry draws great numbers of service providers all trying to make money off the actual producers--equipment dealers, seed salesmen, drug companies, feed consultants, milk haulers, processing plants, and many others. All of these depend on a shrinking number of farmers who invest millions of dollars in the daily miracle of primary agricultural production: the sun, the land, green plants, now a baby calf, then milk.

The process of extracting energy from manure has less appeal than caring for animals but it is a miracle in its own right. When bacteria in liquid manure are kept comfortable at about 100 degrees Fahrenheit, they begin to produce methane (the main component of natural gas). We cannot duplicate this amazing process any more than we can synthesize a newborn calf or squeeze grass out of a pile of mulch. The further that society gets from the basic natural transformations that make life possible, the more easily "value creation" forgets the importance of the actual "creation" part and focuses solely on "value-added".

I recently finished Wealth and Democracy by Kevin Phillips; one of his main contentions is that economic superpowers rise with an emphasis on production and commerce but eventually begin to decline with an excessive focus on finance. The author traces this trend with the Dutch in the 17th century, the British in the 19th, and Americans during the past few decades. We have found plenty of companies in our industry that provide funding, market products, and consult. While we don't doubt that these businesses can be both useful and lucrative, they don't actually create value; they simply allow existing value to be realized more quickly and efficiently.

As children of rural America, we share with farmers an affinity for actually creating things. Eventually, courtesy of vast numbers of bacteria, we will produce electricity and a sawdust-like fiber from cow manure. By selling these and other products ourselves, we will control as much of the value chain after the initial creation as possible. But, in our opinion, finding the most profitable part of the value chain is answering the wrong question; until the renewable energy industry gets much closer to saturation, we must focus on starting new chains rather than latching on to existing ones. That is what is needed for farmers, America, and the planet.