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The Feasibility of Alternative Enterprises in Agriculture Farming Wind & Solar Energy

The Feasibility of Alternative Enterprises in Agriculture Farming Wind & Solar Energy. Prepared by: Rod L. Sharp Norm Dalsted Steve Koontz. Opportunities for Wind/Solar Energy In Agriculture. Lease land to outside developers for large utility-scale wind/solar projects

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The Feasibility of Alternative Enterprises in Agriculture Farming Wind & Solar Energy

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  1. The Feasibility of Alternative Enterprises in AgricultureFarming Wind & Solar Energy Prepared by: Rod L. Sharp Norm Dalsted Steve Koontz

  2. Opportunities for Wind/Solar Energy In Agriculture • Lease land to outside developers for large utility-scale wind/solar projects 2) Farmer-owned, smaller utility-scale projects 3) Smaller projects (less than 100 kW) to offset on-farm energy costs

  3. Additional Business Opportunities • Amendment 37 • Colorado utilities are required to obtain electricity from renewable resources • 3 percent by 2007 • 10 percent by 2015 • 4 percent of the mandated energy must be from solar

  4. History of Wind Power • Traced back 6,000 years ago to grind grains (Egypt and ancient Babylon) • Western world 12th century • Farm/ranch windmill – 19th century • 1930’s wind turbines • By 1950’s REA’s eliminated markets • In the 1970’s there were nearly 50 domestic wind turbine manufactures. 50 percent them focused on small scale models.

  5. History of Wind Power • 1970’s OPEC oil embargo spurred interest again in wind energy. • Advanced new turbine designs • Easing of energy crisis reduced demand • 1980’s increased interest in “large wind farms” • Public Utility Regulatory Policies Act of 1978

  6. Wind Energy in Europe • Denmark • 3,000 megawatts (20% of electrical needs) • Cooperatives of local residents • Europe • 35,000 megawatts (Number one continent in wind power, North America 2nd – 7,000 mw) • Equivalent to 35 large coal-fired power plants.

  7. Wind Energy Systems • Dutch Windmill • Most familiar • Primarily uses • Grinding corn • Pumping water • Saw milling • Water-pumper (fan type) • Pump water in remote areas

  8. Wind Energy Systems • Wind Turbines • Generate electricity. • Slender aerodynamic blades and tall towers (130-230 feet). • A wind turbine should experience year-round wind speeds of at least 12 mph. • Expected life 20-30 years.

  9. Turbine Systems • Rotor – Collects energy from the wind. • Wooden, fiberglass, or metal blades rotate about an axis • Blades are attached to a hub • Hub is attached to the main shaft • Generator converts turning motion into electricity

  10. Turbine Systems • Drag design • Wind pushes blades out of the way • Slower rotational speeds and high torque. • Lift design • Blade is an airfoil or wing • Higher rotational speeds. • More practical for generating electricity

  11. Large Machines

  12. Where will the turbines go? • Primarily on farms…

  13. The National Power Grid

  14. Economic Issues • Large Initial Capital Outlay • Small (1-10 kW) - $3,000-$4,000 per kW • Medium (10-100 kW) - $1,500-$2,500 per kW • Large (>100 kW) - $1,000-$2,500 per kW • Annual Operating Costs • 2-3% of initial system cost • 1-2 cents per kWh of output

  15. Cost to Generate Electricity • Electricity generated by the wind cost 30 cents per kWh in 1975, but now costs less than five cents per kWh. In comparison, new coal plants produce electricity at four cents per kWh. • Wind - $.05 - $.08 per kWh • Solar – $.09 - $.40 per kWh • Coal - $.04 - $.06 per kWh • Natural Gas - $.042 - $.07 per kWh

  16. Wind Farm Investment? • Example Assumptions • 59 kW system - $100,000 • Current cost of electricity - $.06 per kWh • 14 mph site = 100,000 kWh/year • Energy Savings • 100,000 kWh x $.06 = $6,000/year • Operating Costs • 100,000 kWh x $.01 = $1,000/year • Payback Period • $100,000/($6,000-$1,000) = 20 years.

  17. Payback Periods Cost of Electricity (per kilowatt hour)

  18. History of Solar Energy • 1890’s Solar Water Heaters • By 1920’s Solar was replaced by cheaper oil & natural gas

  19. History of Solar Energy • 1970’s energy crisis • Solar Water Heating Markets – Rapid Growth • Solar Industry Reputation Damaged • Poorly designed incentives (tax credits) • Expensive, poorly performing systems • Poor installations (inexperience) • Unscrupulous firms

  20. History of Solar Energy • Today, heating water with the sun is making a comeback in homes and businesses.

  21. Solar Energy Systems • Photovoltaics (PV) – Solar electric panels • Solar cells convert sunlight to DC electricity • Technology is not new • First practical application powered satellites in 1960’s space program. • Since then PVs have powered calculators, road signs, irrigation equipment, and telecommunication systems. • PV industry is growing 25-30% per year. • Deregulation (1990’s) allows selling excess production. • Tax Incentives and/or rebates.

  22. Solar Energy Facts • Worldwide photovoltaic installations increased by 1460 MW in 2005. • Cumulative solar energy production accounts for less than 0.01% of total Global Primary Energy demand. • Four Companies account for over 50% of solar cell production: Sharp, Kyocera, BP Solar, and Shell Solar.

  23. PV System Costs • National Average System Cost - $6,000 per kW (installed cost) • 10 kW system $60,000. • Useful life – 20 years. • Electricity cost - $.20-.$.40 per kWh • Common payback periods – 30-45 years. • PV System costs are declining 4-5% per year. • Increase in conversion efficiencies • Economies of scale

  24. Solar Energy Systems • External Heat Engine (Stirling Engine) • System is filled with hydrogen • Heat expands the hydrogen to drive pistons • 2-3 times more efficient as PV cells. • Converts 30% of suns energy to electricity (PV cells – 10-15%) • Giant dish-shaped mirrors

  25. Stirling Engine System Costs • Dish Generators Costly - $250,000 each • Larger Power Plants • Estimated cost of electricity - <$.10/kWh

  26. So Why Isn’t Everyone Investing in Wind or Solar Energy? • Location is important • Sun does not shine equally everywhere. • Wind may not blow hard enough. • Technology is not widely recognized yet. • Changing rapidly (obsolescence) • Expensive • Like buying 20 years of electricity in one fell swoop.

  27. Advantages of Wind/Solar Energy • Clean source of energy (non-polluting) • Can bring power to remote communities with little or no access to electricity grid • Energy independence • Renewable and sustainable • Very little maintenance • Benefit economies of rural areas

  28. Disadvantages of Wind/Solar Energy • Currently more expensive • Wind and sun are intermittent • Requires a means of energy storage • Converting DC to AC incurs an energy penalty of 5-10 %. • Aesthetic impacts

  29. Colorado Schools Going Solar • 41 Colorado Schools • Educational • Highly visible and closely followed (parents & kids) • Energy savings • 50 watts – 10 kilowatts in size • Hardware and software • Monitor daily and cumulative production of electricity • Monitor atmospheric conditions • Educational curriculum

  30. Wind/Solar Energy Incentives • Renewable Energy Systems and Energy Efficiency Improvement Program (Section 9006) • FY 06 Funding • $11.5 million grant funding • $200 million guaranteed loans • Value-Added Producer Grants (Section 6401) • Business planning and feasibility studies.  • Federal tax credits 1/1/2006 – 12/31/2007

  31. Wind/Solar Energy Incentives • Farm Bill Energy Title(Section 9008) • Cost sharing (Min. 20% non-federal) • Discretionary funding • $12 million FY 06 • Rural Business Opportunity Grants • Eligibility • Public bodies, non-profits, Indian tribes, cooperatives • Technical assistance

  32. Tax Considerations • Renewable Energy Tax Credits (Section 45a) • $.015 per kWh of electricity produced • Must be a qualified energy source (wind/solar) • Must be produced by the tax payer • Must be sold to an unrelated person • Lease Arrangements ($3,000-$5,000 per turbine) • Passive • Non-business (1040 and Schedule A) • Active • Business (Schedules C, E, or F)

  33. Xcel Energy - Solar*Rewards Program • Contact:  Julia GauthierXcel Energy1225 17th Street, Suite 1277Denver, CO 80202Phone: (800) 895-4999 E-Mail:julia.gauthier@xcelenergy.comWeb site:http://www.xcelenergy.com/solar

  34. Keys to Financial Success • The system. • Reputable/dependable contractor • Cost (system and installation) • Size • Efficiency • Location in relation to grid • Battery storage is expensive, high maintenance, limited lifespan • Current and future electric rates • Financial incentives • Grants • Federal/State/ Tax Incentives • Regulatory Environment

  35. Wind/Solar Energy-Summary • Rapid Technology Advancements (improved efficiencies). • Significant cost reductions (conversion efficiencies and manufacturing efficiencies). • Small but growing source of energy supply • Can be competitive with incentives, rebates, and/or credits. • Small wind projects 9-15 percent IRR

  36. Educational Program:Feasibility of Alternative Enterprises • Alternative livestock enterprises • Alternative crops enterprises • Agri-tourism/recreation • Alternative production systems • Renewable energy

  37. Educational Program:Feasibility of Alternative Enterprises • Web-based (soon) rightrisk.org • Self-paced curriculum • Personal assessment • Goals, personal traits, business skills • Production assessment • Physical resources, production requirements, risks • Market assessment • Market potential, competitive advantage, market strategies • Economic assessment • Investment and financial analysis

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