Much of the findings in this study were gathered from secondary research and while attempts were made to undertake primary research with large dairy processing companies in New Zealand and fuel cell manufacturers in the United States, due to commercial sensitivity this was difficult to undertake in the absence of comprehensive data. Therefore, publically available energy use information was largely replied upon.
However, primary research was undertaken through a questionnaire and personal communication (October 18, 2012) with Mr John Gregan, Chief Executive Officer, and Mrs Cara Gregan, Chief Financial Officer of Gregan Dairy and Brookdale Farm in the Hunter Hills, which is located in Waimate District in South Canterbury, New Zealand.
From running a total of 7,300 breeding ewes in 2004, the Gregan’s decided to convert their business to dairying (Gregan Dairy) in 2008 and Brookdale Farm in 2010. The Gregan’s dairy operation is comprised of two non-irrigated farms: Gregan Dairy which is 170 hectares (160 effective) or 420 acres (395 effective) employing 2.5 full-time equivalent (FTE) staff and milking 450 cows. The second farm, Brookdale is 330 hectares (280 effective) or 815 acres (692 effective) employing 3 FTE staff and milking 550 cows. In total this is a 1,000 cow dairy farm operation utilising 500 hectares (440 effective) or 1,235 acres (1,087 effective).
Electricity costs associated with dairy farm irrigation can vary a great deal depending on the depth of the well, how much water is pumped and the type of irrigation system utilised. Gregan Dairy incurs annual electricity costs of $13,000 and some farmers are paying more than $20,000 per month or $120,000 per year in electricity costs for irrigation alone.
Mr Kerry O’Connell and Mrs Carol O’Connell own an irrigated dairy farm in Dunsandel, Canterbury which is leased out. Mr O’Connell (personal communication, October 9, 2012) informed me that their farm is milking 750 cows. As a general guide based on farm advisers figures, electricity costs to run the milking shed are in the vicinity of $25,000 per season and the irrigation cost is approximately $100,000 per season. A season is one year, running from 1 June to 31 May. These costs are commensurate with the operational size of each farm and it should be remembered that the average herd size of a typical New Zealand dairy farm is 386 cows. In North Canterbury, however, where 11.3% of the South Island’s 35.8% of dairy cows are located, a herd of 750 cows is now considered an average size farm. The average New Zealand dairy farmer consumes 88,000 kWh of electricity per
year (costing around NZ$14,000 excluding lines charges).
“Electricity is one of the fastest rising costs in dairy farm operation. Dairy New Zealand reported in 2009, that fuel and electricity prices have increased by 130% and 90% respectively since 2000” (EECA, 2010). Genesis Energy states that the main energy uses on a dairy farm are within the milking shed – hot water heating, milk chilling, the milking system’s vacuum
pump, and water and effluent pumping. Figure 45 shows the energy consumption on a typical dairy farm in terms of percentage of electricity associated with the main energy uses. Energy consumption figures for Gregan Dairy Farm as contained in the questionnaire in Appendix 6, would need to be utilized in analysing the merits of installing a ClearEdge5 energy system on-site at a dairy farm and to help determine if such a project would be (1) technically feasible, (2) feasible
Figure 45: Dairy Farm Energy Consumption
within the estimated cost, and (3) profitable. Putting aside environmental concerns, the study’s findings indicate that such a proposal should be feasible for a dairy farm that has reticulated natural gas supply availability (i.e. North Island) but possibly not feasible from both a practical and profitability perspective where reticulated natural gas is not currently available (i.e. South Island).
8 CONCLUSION
This study explored a feasible option for lowering GHG emissions and creating future stability in terms of capital and operational cost structures through the adoption of a sustainable clean energy source for the New Zealand dairy industry. The focus was on options associated with combining fuel cell technology to generate electricity from natural gas and the application of a PEM energy system to an average sized dairy farm.
The dairy industry in New Zealand is in a phase of significant change and over the next 5 to 10 years will be faced with increased competition from dairy farm operations in emerging countries, the United States and Europe. In the EU alone, “milk production is expected to increase between 55% and 60% in five years following the 2015 EU milk quota abolition” (Astley, 2012). Operating in a geographically isolated country the New Zealand dairy industry must be an efficient producer and remain focused on environmentally sustainable farming practices which incorporate the introduction of innovative clean energy sources.
This will continue to be a challenge while New Zealand is faced with increasing competition from producer countries that continue to heavily subsidise their agricultural sectors, while at the same time having to meet GHG emission restrictions imposed by legislation. As land availability for dairy conversion becomes increasingly constrained, it will be necessary to develop on-farm efficiencies as a means of maximizing growth opportunities. For an innovative industry with over a third of the world’s dairy trade coming from New Zealand dairy exporters, it is possible for the industry to maintain and expand its competitive advantage. While dairy farmers from some countries, particularly in the EU, continue to receive subsidies from their governments which do
not help in the creation of an open and competitive market, one mechanism that can help to alleviate this issue is for the New Zealand dairy industry to assist farmers with advice and encouragement to enter the international carbon trading market. If a dairy farm generating electricity with a ClearEdge5 energy system can reduce GHG emissions then the farmer should be able to issue Certified Emission Reduction units (CERs) or similar type instruments. Entering into carbon trading markets will help farmers to off-set or mitigate the capital and installation costs of an energy system. This is essentially a “work-around” solution to competing against subsidized industries, yet an alternative means of generating cash-flow or revenue and reducing the capital cost of an energy system. “CERs are carbon credits issued in relation to Clean Development Mechanism (CDM) projects. The CDM is one of the flexibility mechanisms defined in the Kyoto Protocol. It allows emissions reduction projects in developing countries to be used to assist developed countries (Annex 1 countries) in achieving their commitments under the Kyoto Protocol. Examples of CDM projects for which CERs are generated include:
Renewable energy: wind farms, hydroelectric power and landfill gas
Electricity and fuel efficiency for households and industries
Reducing emissions in industrial and manufacturing processes (e.g. cement production)
Reducing fugitive emissions from production and consumption of fossil fuels, halocarbons and sulphur hexafluoride.” (Climate Change Information New Zealand, 2012).
Depending on the currency value (e.g. Euro, US$, or NZ$) per CER or per tonne of carbon emission reduction (e.g. 10% to 20%) the payback period on an installed ClearEdge5 energy system could be significantly reduced by utilizing such opportunities as CER or alternative market instruments. It could be an area that Dairy New Zealand or Fonterra may wish to consider acting as a facilitator for dairy farmers to buy and sell carbon credits. For example, farmers could buy credits to meet compliance requirements or voluntary carbon credits to compensate their residual emissions. Likewise, they could sell when the need arises. Dairy New Zealand, for example, could even establish a clearing and settlement division through partnering with an international financial institution such as ANZ Bank to reduce transaction and transfer costs. New Zealand Units (NZUs) are even available under the New Zealand ETS (http://www.anz.com/Markets/Solutions/CarbonTrading.asp).
The study highlights the importance of long-term sustainability, lowering of GHG emissions, and a move toward adopting clean energy technologies to generate electricity from natural gas. The data gathered through primary and secondary research indicates that an average sized dairy farm could benefit from utilising PEM fuel cell technology.
For example, the electricity tariff rate for the Gregan Farm is 16.01 cents per kWh and the night tariff rate is 8.3 cents per kWh. A ClearEdge5 energy system appears to be cost competitive with the system able to generate electricity at about 7.0 cents per kWh and consuming about 40% less fuel than power and heat delivered through the grid. The result is a reduction in carbon footprint by a similar percentage which has to be good for the environment and future dairy industry sustainability. But unfortunately the study falls short in a number of areas.
1. There is no reticulated natural gas in the South Island. It would have been preferable to undertake a more detailed analysis of a North Island dairy farm operation that (a) utilizes natural gas; (b) is irrigated; and (c) is willing to release 2. farm and electricity details in order to conduct an in-depth feasibility study on the
introduction of a ClearEdge 5 energy system.
3. There exists an opportunity to model the specifics of a ClearEdge5 energy system against the needs of such a dairy farm operation to determine (a) to what extent the system would satisfy those needs; (b) what the cost would be to do so; and (c) how it would compare to the status quo.
4. Due to time constraints, there was no opportunity to conduct an in-depth investigation of feasibility factors in terms of the project’s total economic cost including a SCBA.
5. The study highlights that SOFC (Bloom Energy) and PAFC (UTC Power) systems may have significant benefits for large dairy processing operations. It is regrettable that a more detailed analysis of these options could not be undertaken due to the non-availability of required data for a large-scale North Island dairy processing operation and commercial sensitivity concerns of sizeable processing companies involved in the industry.
However, the study has established the basis for the dairy industry or interested parties together with assistance from government agencies (e.g. EECA, MAF) to sponsor a Request for Proposal to undertake an on-farm pilot study. For example, a ClearEdge 5 energy system may be available to import for the purpose of conducting a test case.
EECA or Dairy New Zealand may be able to partner with a research university with
agricultural interests (e.g. Massey University), a university with a strong engineering history (e.g. Canterbury University), Federated Farmers, and dairy interests (e.g.
Fonterra) to complete a comprehensive analysis on a monitor dairy farm as part of an environmental sustainability pilot programme. The pilot study conducted in 2010 as part of the Dairy Energy Action Programme’s initiative to help farmers cut their energy costs showed that “46% of farmers will adopt savings technologies if their costs can be recovered within three years” (NZ Energy & Environment Business Week). A ClearEdge5 energy system costs NZ$68,435 (excluding installation and shipping costs) which is not a great deal when compared to the cost of a typical farm tractor which can cost anywhere between approximately NZ$65,000 and NZ$250,000. Furthermore, the payback period is relatively short on a system with an expected life-cycle of over 20 years.
This study recommends that more research and investigation of applicable options is necessary to satisfy dairy farmers and industry producers in terms of financial modelling and whether fuel cell technology is an economically viable option for the New Zealand dairy industry. “While power companies wrestle with supply and demand equations, the oil and gas part of the sector has to assure a wary public that development can go hand-in-hand with environmental protection” (Management, 2012).
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