Article by Tim Foster, Head of Energy Services, Conrad Energy
Pursuing sustainability remains a key priority for the farming and agricultural sector, as is the case with virtually all industries in the modern world of business.
However, agriculture is unique – it is carbon emitting, but it also serves to sequester and store carbon. Moreover, effective land use can contribute significantly to biodiversity regeneration and climate adaption. In short, assessing the sector’s progress on decarbonisation is not a case of black and white.
But there is a common denominator: farms require energy to function, and this is an area where tangible progress can be made to further reduce the sector’s climate impact.
The UK has a high penetration of renewable energy, but constraints on the grid and accessibility to renewable hubs pose challenges for farms looking to capitalise on the opportunities that renewable energy presents.
However, there are alternative means of plugging into the energy transition that can overcome these challenges, and the benefits of doing so extend beyond purely decarbonisation.
A look behind the meter
Under the traditional model of sourcing energy from an electricity supplier, power is provided as a pure cost for any business.
However, adopting a ‘behind the meter’ approach – which entails installing on or near-site renewable generation to sleeve energy from directly – can not only reduce costs, but it can also open up a new source of revenue for landowners, whilst also decarbonising their operations.
Although installation costs could be a concern, many energy providers offer power purchase agreements (PPAs) whereby the renewable assets are installed without any capital exposure cost to the host farm in return for an agreement to purchase the energy generated at an agreed upon rate and duration – a price that is invariably considerably lower than energy purchased from the grid.
For farms that are able to shoulder the upfront costs of installing renewable energy assets, the financial benefits will naturally be greater still. Indeed, going further, there is also a potential to supply energy ‘over the fence’ to other nearby businesses to generate additional revenue.
As a general rule of thumb, landowners can expect to spend around £700 per kW when installing solar panels, and around £1,500 per kW for installing wind turbines. (It is worth noting that wind turbines produce significantly more energy than solar arrays.)
In front of the meter
Leasing land to host ‘front of the meter’ renewable assets also offers significant financial advantages for the sector. For farms that install solar arrays, for example, the expected rate of return on their assets is around £1000 per acre per annum, or 5 per cent of the revenue, depending on which is higher.
The returns offered by adopting the same approach with wind turbines are harder to predict with complete certainty, due to the significant variation in the generating capacity and differences in average wind speed by location. Modern turbines can achieve up to 4MW so even installing one wind turbine can contribute significant supply to the farm, a neighbour or the grid.
Turbines achieving larger generation will nearly always export back to the grid unless there is very significant onsite consumption. Broadly speaking, however, the timescale for payback on the initial investment to install wind power is typically 5-7 years. Moreover, as landowners are able to reduce their energy costs and even generate additional revenue through this approach, this opens the door to reinvestment into decarbonisation elsewhere, such as sustainable farming equipment.
The practical steps
Installing behind the meter energy generation is a long-term commitment, and this is the case whether doing it through a PPA or if the landowner fronts the cap-ex costs themselves. As such, it is important to consider which options are the best fit for each individual farm, as no one size fits all.
The best approach will naturally depend on a variety of factors, including size and location of the farm in question, what its primary production is, and how much energy it requires to run.
For a large farm with plenty of land at its disposal, installing solar panels in fields used for grazing animals is an entirely viable option, and does not come at the detriment of the land’s quality – more on this later.
For smaller farms that may not have this option at their disposal, however, a popular option that many landowners are exploring is to install solar panels on built assets, such as barns.
Cooperative energy projects that bring individual farms in close proximity to one another together in a joint effort to pool resources can also enable these farms to host renewable energy installations on a larger scale. This allows smaller agricultural operations to take a position as key stakeholders in shaping the future of sustainable agriculture.
Planning rules are naturally an issue that needs to be kept in mind when looking to establish on-site or near site generation, but in recent years we have seen restrictions on this front somewhat loosened. The government has scrapped laws requiring local residents to be in support of a scheme, but residents can still oppose development, so good community relations are important from the outset – and installations need to be on an appropriate site, just like any other planning proposal.
Bolstering green agricultural production
Installing renewable energy assets, for instance wind turbines or solar arrays, might on the surface appear to bring challenges to agricultural production. However, there is no reason that the installation of renewable energy assets should have a significant impact on food and fibre production.
Solar arrays can actually aid agricultural production – benefitting soil nutrients and biodiversity by allowing degraded fields to lie fallow whilst still generating revenue. Given the speed with which solar arrays can be erected, and the low impact of hosting such arrays, fields can also be returned to their former use when the solar installation reaches the end of its life.
If wind turbines are installed, although a small amount of land may be lost for cropping because it is not possible to plough right up to the tower, animals will still be able to graze beneath the turbines meaning that the impact on agricultural output is likely to be minimal.
A final example of the potential benefits of renewables is anaerobic digestion. In tackling two sustainability issues at once, AD can offer farms a way to diversify income by converting farm organic waste into biogas for energy, reducing reliance on external energy sources.
AD also provides nutrient-rich digestate, which can be used as a natural fertiliser, enhancing soil health, boosting carbon sequestration and reducing chemical fertiliser costs.
Overall, energy is an area that holds major potential for the farming industry to continue its progress towards decarbonisation.
For landowners exploring this opportunity, the option of going ‘behind the meter’ can pay dividends that extend well beyond becoming a greener operation.