Investing in renewable energy could provide hard-pressed egg producers with an opportunity to ease their economic problems.
Free range egg producers are currently suffering substantial losses because of a combination of reduced producer prices and rising costs, but one free range egg company - the Bowler Group - is taking advantage of Government incentives to generate its own green electricity and to cut its costs by doing so. It says it can help others to do the same.
Jonathan Thompstone, head of Bowler Energy and a free range egg producer in his own right, said, "With the financial incentives being offered by the Government to encourage the generation of electricity from renewable sources, we quickly identified renewable energy as a cost effective means of both reducing our energy costs and generating income."
He said that with Ofgem forecasting that electricity prices would rise by 60 per cent over the next six years, a producer stood to make substantial savings by generating his own electricity from wind turbines or solar panels. The fact that the Government was willing to pay an incentive for every unit of electricity generated in this way made investing in renewable even more attractive, he said.
Jonathan Thompstone took us to two of Bowler’s own farms where renewable energy generation systems have been installed. One of them, Betty’s Farm, which is close to Bowler’s headquarters at Hilton in Derbyshire, is a relatively new farm – created about 18 months ago. It has two 12,000-bird free range units using about 80,000 kilowatt hours of electricity in total over a year. An 11 kilowatt wind turbine on the farm produces 20,000 kilowatt hours and plans are in place to install photovoltaic panels that will generate 80,000 kilowatt hours on their own. Surplus electricity will be sold into the national grid.
"To be honest, this is not an ideal site for a wind turbine. We are low down and there are trees getting in the way," said Jonathan. However, he said the turbine, which was made in Denmark, had been designed to perform better at lower wind speeds and it was generating a quarter of the needs of the two sheds on the farm.
The turbine has been running for three months and has so far generated 4,700 kilowatt hours (or units). A total of 4615 of those units have been used on-site. For an 11 kilowatt wind turbine the Government is currently paying 28 pence per unit for each unit used on-site. In addition, each unit generated in this way is a unit that does not have to be bought from a power company at a cost of possibly 12 pence per unit. The total financial benefit from the turbine could be some 40 pence per unit – a substantial economic incentive in these difficult times for free range egg producers.
Because electricity generated in this way cannot be stored for use later it is likely that there will always be times when too much electricity is being produced for the farm’s needs. This surplus electricity automatically goes to the national grid and the producer is paid a Government-guaranteed minimum of 3.1 pence per unit for it. Together with the Government paid incentive of 28 pence per unit, the total benefit from electricity sold to the grid amounts to 31.1 pence per unit.
"In reality you will have some electricity going both ways but you can see that you will be better off using it on-site than exporting it," said Jonathan.
Another one of Bowler’s own farms – nearby Woodcock Farm – has had two 9.87 kilowatt photovoltaic arrays installed to generate electricity. They are contributing 16,000 kilowatt hours towards the 90,000 kilowatt hours used on the farm, which has two 9,000-bird free range units. Jonathan said that the company was planning to install more photovoltaic panels on the farm to increase the volume of renewable electricity produced.
The incentives outlined by Jonathan Thompstone look attractive, particularly as the payments are linked to the Retail Price Index. However, you need to be able to make the initial investment in order to benefit from FITs, and if you do not have the resources to do so the Bowler Group has put together a package to help interested producers get into renewable energy. Bowler’s has taken a similar approach to that used in its core free range egg business – offering an easy way in by providing a turnkey service.
The package offered by Bowler Energy includes site investigation and site survey to establish suitability for renewable generation, feasibility studies and planning, installation, commissioning and registration for the FITs scheme, monitoring and analysis of performance, maintenance and support and, of course, finance. For those who do not want to jump in fully, Bowler’s is also looking for suitable land for rental agreements. A producer willing to let his land out would receive in return a flat rate rental payment from Bowler’s plus cheap electricity.
Jonathan Thompstone says that circumstances inevitably differ from farm to farm. Suitability for renewable generation would first of all need to be established for an individual farm and each farm may be suitable for different types of generation.
Mick Thomas, a former Nat West bank manager who now works for the Bowler Group dealing with finances, produced economic forecasts showing that an 11 kilowatt wind turbine could achieve payback in just over four years on the current terms offered by the Government. The initial cost using Bowler’s turnkey package would be £63,000. The annual income from a mixture of using electricity on-site and selling it to the grid would be just under £15,000 – and Mick said that was a conservative estimate of income. A 50 kilowatt wind turbine would cost £265,000, generate an annual income of £55,399 and would pay for itself in just under five years.
Payback periods for photovoltaic are a little longer. A 9.87 kilowatt system would cost £32,500, generate annual income of £3,714 and pay for itself in just under nine years. A 49.9 kilowatt system would cost £130,000, generate £16,769 income each year and pay for itself in just under eight years. None of these projections take into account forecast increases in energy prices over the years ahead.
The race is now on to obtain the best incentives under the FITs scheme. The Government has already brought forward reductions in support for new large photovoltaic installations because of higher than expected take-up of the incentives. From August 1 this year payment for systems of between 50 and 250 kilowatts will be 19 pence per kilowatt hour. The Government will now pay 15 pence per kilowatt hour for systems between 150 and 250 kilowatts and 8.5 pence per kilowatt hour for systems between 250 kilowatts and five megawatts. Under current tariffs, systems between 10 kilowatts and 100 kilowatts attract 32.9 pence per kilowatt hour and those between 100 kilowatts and five megawatts receive 30.7 pence per kilowatt hour.
Payments for smaller solar systems will also be reduced from March next year, although anyone who enters the scheme before that time will be contracted at the current rate. For systems between four and 10 kilowatts the payment will fall from 37.8 pence to 34.5 pence per kilowatt hour next March and for systems between 10 kilowatts and 50 kilowatts the payment will fall from 32.9 pence to 30 pence.
Some rates for wind generation will also fall next March. For installations between 1.5 and 15 kilowatts the incentive will be reduced from 28 pence to 26.7 pence and for systems between 15 and 100 kilowatts the rate will fall from 25.3 pence to 24.1 pence. For systems between 100 kilowatts and 500 kilowatts the payment will be remain 19.7 pence.
Anyone interested in wind generation may find it difficult to battle their way through the planning process before next March, although there is probably still time for photovoltaic systems to be up and running before next spring. They present less of a planning problem.
In any event, anyone who wants to take advantage of FITs should probably act quickly to obtain the greatest incentives.
