Solar at the dairy: how to crunch the numbers

SolarDairy

I’d love to install a solar system here on the farm but since we use most of our energy in the dark or at sunset, it’s a real challenge make it affordable. I’m really grateful to dairy energy expert Gabriel Hakim of AgVet Energy in Warragul for writing this guest post on how to crunch the numbers!

Energy Audit with Gab

Gabriel Hakim and Wayne check out the dairy during an energy audit back in 2012

With the backdrop of the recent closure of Hazelwood, and continued uncertainties over supply and prices more and more dairy farmers are asking “Can solar work for me?”.

The way electricity is consumed on most conventional dairies – early morning, late afternoon, and overnight – means it is a challenge to maximise the direct benefits of solar.  In southern Australia, most of the electricity generated by photovoltaic panels (PV) occurs between milkings, during the middle of the day.

How this electricity is used has huge implications for the economics of PV.  The three broad options are:

  1. sell all unused generated electricity into the grid;
  2. store unused generated electricity and use it later; and
  3. change the timing of electricity-using tasks so they make use of the electricity as it is generated.

The reality of course, is to deploy a combination of these options. This post explores option 1 for installing solar on an existing dairy with:

  • Twice-a-day milking. 6:00 – 9:30 am and 3:30 – 6:00 pm (includes milk cooling time)
  • 450 milkers calving all year round
  • 40-50 units
  • Conventional cooling (glycol chiller, with final direct expansion cooling in vat)
  • Conventional cleaning (warm pre-rinse, hot wash, hot final rinse) – ~1,600 l hot water/day
  • Average daily electricity consumption 450 kWh (large user)
  • Electricity charges are 22.6cents/kWh and 10.1 cents/kWh (ex GST and after discounts have been applied) for peak and off-peak respectively. Annual spend on electricity is $22,206.71 (ex GST).

How big should the PV system be? 

The optimum size depends on several things such as; the load profile, how much of your consumption you aim to off-set, the available roof space (or ground space), and how much you’re willing to invest.

For this case, let’s choose a 50 kW quality brand PV system. The going price for this roof-mounted system on a tilt frame is $59,545 (ex. GST) net of RECs.  And, from July 1, 2017 the feed-in tariff rate increased to 11.3 cents/kWh.

Whilst the calculations for the economic analysis might be straightforward, the real challenge is making realistic assumptions about power usage.

Unfortunately, many solar systems salespeople don’t have a good appreciation of dairying and I have seen too many instances where the intended outcomes are never realised because of poor or incorrect assumptions.

For the example dairy, the maximum proportion of PV generated electricity that can be consumed directly is 48% because the bulk of the electricity generated is typically between 11:00 am and 3:00 pm, when very little or no equipment is operating.  To increase the proportion of direct consumption would require shifting tasks to this timeslot – option 3, to be discussed in another post.

The PV system

PV system Size 50 kW PV capital cost $59,545
Average annual electricity generation  72,560 kWh Simple payback period 5.8 years

GabrielSolar1Table

Even with 48% of the generated electricity being directly consumed – and 52% being exported – the annual savings are substantial, $10,613 in year 1. The simple payback period for this investment is 5.8 years. Higher tariffs or future price increases would make the payback shorter.

The “take-home” lesson here is that the more you can consume directly the better the financials stack up.

If the PV system was bigger, say 80 kW, you might be able to capture a little more for direct use during the winter months but you will be simply exporting more to the grid. It is still financially attractive but requires more investment (~$95,300) and payback time is extended by about six months.

Financing solar
The financial indicators above assume farmers have the money to fund this investment stashed under the pillow (we all wish it was).

Fortunately, over the last three years or so the financing market has become far more amenable to funding energy related equipment. The number of institutions that offer products targeting this space seems to grow every month.

The Sustainable Melbourne Fund (http://sustainablemelbournefund.com.au/), for example, has broadened its focus to regional areas and is very interested in getting involved in the agricultural sector. They were really impressed by the environmental credentials of the Green Cleaning System I designed a few years back.

A cashflow-neutral investment
Financing an investment such as this can be very attractive as the savings in the electricity bills can be used to service the repayments. By negotiating a low (interest) rate and reasonable term length (5-7 years), these types of projects can become cashflow positive from the very first bill.

If we were to finance the above 45 kW PV system over a 7-year term, the fixed monthly repayments would be $846 equating to $10,152 per year. If we manage to achieve 40% or more direct consumption of the PV generated electricity, then this project would be “cashflow neutral” or even slightly positive from the outset. After seven years, the saving can be banked.

So, “Should I go solar?” is worth thoughtful consideration. The option presented here is the least financially attractive of the three options but still has merit. Ensure that any assumptions made are directly relevant to your situation. Do your homework and don’t hesitate to seek advice.

Thank you, Gabriel, and Milk Maid Marian looks forward to the next installment of solar smarts.

4 Comments

Filed under Farm, Machinery and equipment

4 responses to “Solar at the dairy: how to crunch the numbers

  1. Conventional wisdom is starting to swing around from having all panels facing north, to having some on the East and West, to catch the sun when it’s actually needed.

    Like

  2. Ron Paynter

    An interesting post Marian, and one that coincidentally comes after I looked at a technology report yesterday about the newest generation of panel in the lab being 44.5% efficient rather than the 25% that is tops for the best existing commercial panels. Advances like this will tip the equation again as the cost of the newly developed panels falls as they are commercialised.

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  3. Tony Gardner

    There are also interesting developments in setting up community owned energy, eg a group of farmers or local community co-investing in a micro grid. The new Southern CORE fund, (Community Owned Renewable Energy” has been set up to provide interest free loans, and ComMET (Communities Making Energy Together) will help community groups with technical expertise and funding models. It’s a new space but its growing rapidly.

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  4. Pingback: With the backdrop of the recent closure of Hazelwood, and continued uncertainties over supply and prices more and more dairy farmers are asking “should I go solar?”.

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