How much will your future agricultural energy costs be in 5, 10, 20 years?
Download Future Agricultural Energy Costs PDF version here
Highlights:
- California farmers pay one of the highest rates in the US
- Many farmers can expect to pay at least $2,000,000 in electricity costs over the next 20 years
- A farm that averages $10,000 a month today can expect to pay over $156,173 in 2030
- Renewable energies, like agricultural solar, are investments businesses can make to save significant energy costs in the future
This article was written in 2020, and electricity costs have grown higher than our conservative estimates here.
Learn more about 2023 agricultural electricity rates.
Future agricultural energy costs will continue to rise, 95% of recently surveyed California farm owners and operators agree. The question is how fast and how can businesses plan for this growing cost. Revel Energy traced back the average Commercial and Agricultural energy costs back to 1990 and data shows an average of at least 3% year over year growth, this is a conservative estimate.
If you look at only IOU providers (i.e. SCE, SDG&E, and PG&E) the average is higher. For example, SDG&E commercial customers have suffered year over year growth of 4.7% recently. Considering our conservative average of 3% annual growth, California farmers have a serious cost issue in need of attention. Many mid to large farms will likely spend a total of $2,000,000 (cumulative) or higher on electricity costs over the next two decades. High costs of electricity bills lessen a farmers competitiveness and ability to reinvest.
How much will your agricultural business spend on electricity over the next 5, 10, 20 years? The table below offers an idea based on your average monthly electricity cost for 2020. Pick the column that is closest to your average monthly electricity bill for 2020. Keep in mind, summer months are much higher than winter months. For closest estimates use an average.
The table below is based on an average electricity rate cost growth of 3% annually for California C&I businesses.
A Closer Look
A California farm that spends an average of $10,000 a month in electricity today is projected to spend $135,061 in 2025, $156,173 in 2030 and $210,421 in 2040. These costs are substantial and will severely affect operating expenses which already run high for California farmers.
The business will spend over $3,000,000 in electricity from 2021 to 2040. Even with inflation, this expense will be tough to recover. The money lost could have either added to net profit or reinvested in the business. There are thousands of businesses like the one described above. How can California businesses manage these rising expenses?
Cause and Effect of Future Agricultural Energy Costs
Why are electricity rates increasing? There are several factors at play here. For California IOU’s, maintenance costs of an old, run-down grid continue to mount.
California’s electrical infrastructure recently received a D- grade from the American Society of Civil Engineers (ASCE). The cost of this work is passed through to customers. Read more here about ASCE’s report.
In 2018 California Governor Jerry Brown signed SB100 into effect. Under the bill, it mandates California energy must be at least 50% sourced through renewables by 2025. Further, the state must be 100% by 2045.
Some communities, like San Diego, have set higher goals of 100% in a much shorter time frame. This is a large contributor to San Diego’s record-breaking energy rates.
California not only has one of the highest electricity rates in the US, but it also has the most aggressive plan for going carbon natural.
This policy is in effect on both the state and local level. One of the ancillary effects is rising costs which force businesses to use less electricity, through energy saving technologies like LED Lights or supplementing with renewables.
Solutions
Renegotiate your future agricultural energy costs.
Check with your electricity provider to make sure you are paying on the best rate plan that fits your business needs. If your business has high demand charges perhaps switch to a plan that accommodates those factors.
Contact a Revel Energy specialist to learn more about your electricity bill.
Make sure you are using energy saving practices on your irrigation system.
California farmers incur the bulk of their energy usage through the on-farm irrigation system. By following some energy saving best practices, farmers can reduce the energy usage. Read more about On-farm energy saving tips here.
Use Agricultural Solar + Energy Storage to supplement your electricity usage.
California is one of the most solar rich states in the US. This free source of electricity is being rapidly adopted by California farmers looking to lower their electricity costs and carbon footprint. Businesses that use agricultural solar also gain a competitive advantage over their competitors by lowering operating costs, thus improving margins or lowering the pricing of their goods and services.
Agricultural Solar + Storage Installations With Revel Energy
Agricultural solar + storage is more affordable than ever. With the Solar Investment Tax Credit (ITC), Bonus Depreciation and other local incentives, businesses can expect an ROI on their renewable technology as fast as 3 years (in some cases even faster with 2023 ITC adders). In most cases, agricultural solar alone will drastically lower energy bills. If a business has drastic spikes in energy demand (i.e. the demand profile graph below), energy storage can increase savings dramatically through peak shaving while the facility requires more electricity.
Conclusion
Electricity costs will continue to rise into the foreseeable future. How California farmers adapt, will play heavy on their future success. Businesses that plan now for the future position themselves for greater savings creating higher profits.
For agricultural businesses that receive electricity from SDG&E, SCE or PG&E the need to act is much greater. IOU’s are expected to incur significant maintenance costs for their dilapidated grid. These costs will more than certain be passed on to their customers. Farmers can take the first step towards lowering these costs by contacting a agricultural energy expert, like Revel Energy. A brief consultation can unearth several options for lowing costs and usage.
Revel Energy has experience developing bespoke agricultural solar solutions that meet the exact needs of the facility its installed on. Our team conducts a through energy analysis to determine a business’s energy profile so that our solution is all-encompassing. Contact a Revel Energy solar specialist today for a free energy audit for your agricultural business.
About Revel Energy
Revel is on a mission. Dedicated to renewable energy solutions since 2009, Revel Energy was formed to provide Commercial, Industrial and Agricultural businesses with alternative energy beyond solar. Revel stands out from the competition by paying attention to what makes good business sense to each individual client, implementing a wider range of technologies to free up capital and make businesses sustainable and more profitable.
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Client Testimonial: Kelemen Company
Corporate Business Park in Irvine, CA has created significant electricity cost savings through commercial solar installed across the 5-building business park.
Client Testimonial: Tice Gardner & Fujimoto LLP
See how this CPA firm saved on electricity and gained valuable tax credits through commercial solar that they used to keep cash in the businesses.
AGRICULTURAL SOLAR
Commercial grade solar for farms supplies independent electricity for on-farm equipment like irrigation systems. Also powers storage, packaging and other buildings.
CARPORT SOLAR
Free standing carport solar generates added solar power for properties with limited rooftop space. Added benefits include shading and protection for employees vehicles.
ENERGY STORAGE
Crucial for reducing peak demand charges. Automated to supply electricity when your panels won’t. Energy storage is ideal for businesses that incur significant peak hour charges
LED LIGHTING RETROFIT
Generating independent solar power is one piece of the puzzle. Energy saving equipment like highly efficient LED Lighting completes the system. Significantly reduce energy usage.