Clean Energy Strategies for Agricultural and Rural Communities

The last several decades have not been kind to rural communities – working farms and rural manufacturing plants are in decline, energy costs have skyrocketed, and increasing numbers of farmers require supplemental incomes to survive.  Consider the following statistics:

• Seventy years ago there were almost 7 million farmers in the U.S. Today there are roughly two million.  Between 1987 and 1992, the United States lost an average of 32,500 farms per year.[i] 
• Extreme poverty is disproportionately concentrated in rural areas.  Of the 500 poorest U.S. counties, over 90% are rural. And of the 382 counties where poverty rates exceed 20%, 95% are rural.[ii] 

At the same time, the United States is experiencing another, different crisis.  Runaway energy prices, declining air quality, and the tense politics of oil supply are testing the wisdom of conventional energy strategy.  This has resulted in an impressive development of more secure and safe energy alternatives.

Many of these alternatives, especially wind energy and biomass/biofuels, rely on the availability of open land and agricultural crops to generate power.   Agricultural and rural communities can take advantage of these assets, which they have in abundance, to fuel new energy technologies and access new markets in America’s energy sector. 

In addition to providing new revenue flows to rural economies, energy diversity also supports the heart of rural economies:  farming. Current energy policies expose farmers to considerable risk.  Recent price volatility in the natural gas market has caused gas prices to spike[iii] -- this directly affects farmers, who rely on natural gas to power irrigation, space heating, and grain drying.  Natural gas also constitutes over 80% of the cost of nitrogen based fertilizers.  At a traditional natural gas price of $2.50 per thousand cubic feet, the manufacturing cost for anhydrous ammonia is $83.75 per ton.  When prices jump to $7 per thousand cubic feet, fertilizer production costs spike to $234.50.[iv] 

Rural and Agricultural Community Resources

While a comprehensive solution to rural poverty is well beyond the scope of this writing, one thing is clear: generating more of America’s energy domestically will create opportunity and protection for farmers and rural communities.  Below you’ll find discussions of new technologies that can help rural enterprises manage costs, capture new revenue and support the immediate community.  (For a nice overview of renewable energy technologies available to rural landowners, including the necessary land conditions to make each technology cost-effective, see the Harvesting Clean Energy website.)

Wind Energy: Taking Advantage of Open Space

Wind energy is one of the most promising renewable energy technologies, matching up competitively with the costs of coal power generation.  A lot of undeveloped wind potential exists in the U.S., the vast majority of which rests on agricultural and rural lands.  Wind turbines can be integrated into an agricultural setting with little or no disruption to ongoing activities and can provide an important revenue stream for individual farmers or communities.   For example, the Department of Energy suggests that if wind power comprised 5% of U.S. electricity market wind power, it would inject $60 billion in capital investment into rural communities; moreover, this investment would provide $1.2 billion in new income for farmers and landowners, and create 80,000 new jobs.[v] 

Farmers and rural communities can pursue wind development through several channels:

Land Lease Agreements

Wind energy integrates easily into farming operations, but its high entry costs can be prohibitive.   Farmers who are unwilling to assume the risk, cost and technical demands of a utility scale venture can lease land rights to wind energy developers. 

Owner-Operator

Under this approach, the farmer owns and operates the turbines as an independent power producer, selling electricity to a utility. The owner-operator model requires considerable risk tolerance and startup capital but investment pooling can mitigate risk and individual financial requirements.

Self Generation

Farm operators can also use wind turbines to satisfy their own energy requirements.   Where utilities purchase power at avoided wholesale cost, it may be more economic to offset retail priced energy consumption. 

Solar Energy: Achieving Independence from the Grid

Farmers can save money over the long run by using solar power.   Solar space heating, crop drying, daylighting, water heating and water pumping are all inexpensive methods for reducing energy use and achieving independence from the power grid.  Solar radiation is abundant and immune to energy cost fluctuations, representing a stable option for lean and efficient farming. 

Energy Crops: Putting Land to Use

Energy can also come directly from the earth.  Farmers can dedicate cropland to a variety of energy crops, such as corn, soybeans, and switchgrass, which can be turned into electricity and fuel.  Switchgrass is a particularly good crop for farmers in that it grows quickly and can be harvested annually without replanting.   Under expanded crop production and improved conversion techniques, biomass could eventually provide for 14% of electricity generation and 13% of motor fuel use.[vi]

Another large potential market for biomass is in products that are currently petroleum-based, including many chemicals and plastics.   Though biobased chemistry is not a new field, it has recently become very popular as scientists have realized that the same process that is used to create biofuels – releasing the sugars that make up the starch and cellulose in plants – can also be used to create a number of commercial products, such as antifreeze, plastics, and glues.  “Green chemistry” opportunities such as these are another potential emerging market for rural communities.  

New Fuel Additives

Ethanol – either corn or cellulosic – can be used as a fuel additive.  While ethanol displaced roughly 2% of motor fuels in 2003, the likely phase-out of MTBE (as well as increasing federal subsidies for ethanol production) will drive considerable demand for the resource.[vii]  

Corn-based ethanol is not without its critics, as the fuel takes a large amount of energy to produce (about one unit of gasoline – used for fertilizing, harvesting, and bringing raw products to processing plants – is needed to produce 1.3 units of ethanol); however, critics have argued that producing traditional gasoline also requires large inputs of fossil fuels.   The U.S. government and many states are now looking toward cellulosic ethanol, which uses perennials such as switchgrass and woody waste as its feedstock, as a more energy-efficient fuel alternative than corn-based ethanol.   

Biomass can also be used to produce biodiesel, a fuel additive produced from biomass oils, such as soybean or rapeseed oils.  These biodiesel fuels can then either be combined with regular diesel fuel as an additive, or used on their own.  Because many farm vehicles run on diesel fuel, rural biodiesel production can have an immediate effect of lowering fuel prices for local farmers and other rural landowners.

Anaerobic Digestion: Using Animal Waste Productively

Farming operations can make productive use of wet waste through anaerobic digestion.   In this naturally occurring process, bacteria decompose organic material such as manure and produce biogas as a byproduct. Biogas is comprised of 60-80% methane.  Farmers can combust biogas for heating, cooking, or electricity generation. Digestion has other important benefits to farms, such as reducing manure disposal costs and dramatically reducing odor problems (and resulting lawsuits!).

Biomass: Using Crop Waste Productively

While ethanol can be refined from energy crops, it can also be made from crop residue.  Much of this residue can be diverted to energy production while still leaving adequate coverage for soil enrichment and erosion prevention. Transforming these and other wastes into energy will enhance farm profit while reducing tipping fees and pollution.

Carbon Sequestration or “Carbon Farming”

Environmentalists and energy advocates are just starting to talk about a new idea for making the most of America’s farmland:   carbon sequestration, or “carbon farming.”  This policy would actually pay farmers to plant trees on their land or to till land less frequently, which would result in more carbon dioxide staying underground (or “sequestered”) rather than being released into the air to contribute to greenhouse gas effects.  Experts say that a carbon farming program could recapture 15-20% of all U.S. carbon dioxide emissions, and could provide necessary income to farmers as well. 

• Read testimony to the Senate Environment and Public Works Committee on the environmental and economic benefits of agricultural carbon sequestration here.

Economic Development through Rural Energy Investment

One thing that rural communities in America need desperately are jobs:  good, family-supporting jobs with career potential.  The Apollo Alliance believes that a rural economy based on renewable energy, biofuels, and bioproducts could lead to jobs in a range of areas, including:

• Manufacturing, operating, and maintenance of wind turbines, biofuel plants, anaerobic digesters, biorefining plants
• Biofuel distribution
• Power grid jobs in design, construction, engineering, cable and conduit laying
• Research and development in renewable energy, green chemistry and next generation fuels
• Transportation (trucking, rail)
• Commercial building construction

Smart, targeted rural energy investment that allows farmers and rural landowners to ultimately own the energy and fuel they produce can also go a long way toward wealth generation for rural areas.    

Policy Support for Rural Energy Investment

Though rural land-based energy is promising, it is a significant departure from convention and will require considerable policy support to achieve scale.   The sections below outline model policies that can facilitate this process. 

Renewable Fuel Standards

Renewable Fuel Standards require a percentage of all gasoline sold in a state to be made from renewable resources.  In the most recent federal Energy Bill, the U.S. government enacted a RFS requiring the U.S. to double its ethanol and biodiesel use in the next two years, and putting extra weight on cellulosic ethanol as a fuel source.  Some states, notably Washington, are considering biofuel standards of their own, hoping to spur domestic production of these fuels.

Renewable Portfolio Standards

Renewable Portfolio Standards have become the leading policy tool for shifting U.S. energy consumption to clean and secure resources.  These laws operate by gradually ratcheting up a minimum share of renewable energy in the greater retail electricity mix.  In 2005, for example, an RPS could require a utility to supply 5% of its retail electricity sales through renewables; in 2007 the requirement might increase to 7%, and so on.  By establishing certainty in the electricity production market, an RPS will make utilities more willing to invest in renewable energy generation in both urban and rural areas.

Interconnection

If the United States is to achieve energy independence through its farmland resources, renewable generators must first connect to the grid.  This is knows as interconnection.      Establishing interconnection standards allows renewable energy systems to sell surplus electricity on the utility grid during times of excess and draw grid electricity when the renewable energy system is not producing enough. 

Renewable energy tax credits

Renewable energy tax incentives help spur investments in renewable energy generation, bringing these technologies quickly to market scale and thereby lowering costs.   They can apply to both electricity and transportation fuels, supporting a wide range of farm-based energy projects.  One example is the Federal Production Tax Credit, which awards electricity generators a 1.8 cent/kWh tax credit for wind, biomass and anaerobic digestion.  Because the federal PTC is often incaccessible to small, remote rural producers, states should consider passing state-level PTCs to reach these constituents as well.   

Farm Bill Incentives

Agriculture Secretary Mike Johanns recently announced the availability of $22.8 million to support investments in renewable energy systems and energy efficiency improvements by agricultural producers and rural small businesses.  These funds are available under the Renewable Energy Systems and Energy Efficiency Improvements loan and grant program, which was part of the 2002 Farm Bill.  The money will be distributed through a competitive grant program.  For more information, and an application, go to the USDA Rural Developmentwebsite.

Alternative Fuel Vehicle Market Support

Vehicles consume nearly half of all foreign oil, and thus are a logical target for reducing the nation’s energy dependence.  One smart way to do this is to increase the blends of alternative fuels with traditional gasoline.  Many consumers already use gasoline that is blended with ethanol, and many fleets of heavy-duty vehicles use 100% biodiesel or a 20% biodiesel blend.  Supporting vehicles capable of running on these fuels will reduce our dependence on foreign oil and help rural economies that produce the raw materials for ethanol and biodiesel.  Alternative fuel vehicle market support takes several shapes including consumer tax incentives and government procurement requirements.

Research, Design and Demonstration

Continued investment in research and development by all levels of government is vital to help rural energy producers make the most of their resources.  Research funded through the U.S. Department of Energy has been instrumental in reducing the costs and increasing the productivity of wind turbines, and in supporting emerging technologies such as carbon sequestration and hydrogen fuel cells.  Universities are a natural locus for these research activities, and many states have increased funding for the research into biobased products that will benefit their economies.  For example, Governor Tim Pawlenty of Minnesota has announced his support to establish the University of Minnesota as a National Center of Excellence for Biofuels Research.[viii]

Conclusion

As America transitions from its current dependence on foreign energy sources, farmers and rural communities stand to benefit greatly.  The resources necessary to build new and clean electricity-generation and fuel production infrastructure – open land, growing capacity, and waste streams – are abundant in rural areas.   If these resources are fully utilized through the policy tools outlines above, the resulting energy transition will sow the seeds for a new era of productive farming and rural prosperity.