When is Natural Gas a Viable Option for Ohio Farmers?

September 30, 2016 Ohio Soybean Council

Farmers are natural innovators, always seeking a better or more efficient way to manage their farms. Work on the farm never seems to have a stopping point; tasks simply change with the seasons. With more farmers investing in on-farm grain storage in recent years, this fall season finds many farmers analyzing energy costs and the effectiveness of their grain drying systems and other heating systems, such as temperature regulated confinement buildings. Converting farm operations to natural gas may be a logical next step to realizing efficiencies and savings.

The Ohio Soybean Council (OSC) and soybean checkoff recognizes that farmers are faced with both threats and opportunities in the critical infrastructure that facilitates their work on the farm. Recently, OSC conducted research and surveyed farmers to identify the most prevalent critical infrastructure issues and assistance farmers need to tackle them. Supported by OSC partner Energetics Incorporated, the findings were evaluated by issue prevalence, likelihood the impact of the threat or opportunity would be realized within three years, cost factors, and the overall magnitude of the issue. In the energy category, natural gas topped the list for both threats and opportunities, prompting OSC to take a closer look at the logistics and economics of farms accessing natural gas.

“We wanted to look at the efficiency of farmers adding natural gas as an energy source on their farms,” said Dave Dotterer, chair of OSC’S demand committee and soybean farmer from Wayne County. “We understand there are multiple solutions and they’re not going to make sense for every operation. We looked at potential conversion options and what a farmer would need to know to make a determination of cost and return on investment for their particular situation.”

Economic Viability of Natural Gas

A key starting point is to determine the economic viability of natural gas conversion by assessing the farm’s current propane usage and the associated fuel cost comparison with natural gas. Since propane is typically sold by the gallon and natural gas is typically sold by 100 cubic feet (ccf), the energy content—measured in British thermal units (BTU)—becomes the commonality. In May of 2016, propane prices were $1.33/gal (equivalent to $14.54/ million BTU) while natural gas prices were $0.78/ccf (equivalent to $7.50/million BTU). If a farm used 20,000 gallons of propane per year at a cost of $26,600, the energy equivalent cost of natural gas would be $13,725 with a potential savings of $12,875 per year.

Once the savings potential is established for a farm, the next step is to determine the actual cost of conversion and how long it may take to realize a return on that investment. OSC has made available an Excel spreadsheet for farmers to input numbers such as distance to the pipeline, energy usage, propane cost, and conversion costs. The spreadsheet automatically calculates annual costs, annual savings, and the estimated payoff period (in years). Additional documents available to farmers include a fact sheet on the conversion process and a list of organizations integral to the conversion process, including the local utility, a local co-op or government aggregator group, transmission companies, supply negotiators, state and national trade associations or non-profits, and equipment manufacturers. The information is being distributed to OSU Extension and disseminated through their agents across the state as part of their Energize Ohio program for renewable energy.

“We quickly discovered most farmers already know the layout of the pipelines and where they run, but we found that even those within half a mile have a hard time making connections with the right people to find out how to make it happen,” added Terry McClure, OSC Board Chairman.” To simplify the process for them, we’ve put together worksheets with calculations, information and contacts farmers would need to make the conversion.”

Is Natural Gas Conversion Right for Your Farm?

To give farmers an idea of what to expect from the conversion process and return on investment, OSC commissioned a case study based on a 2,000-acre crop farm in Ohio with two hog barns located one half mile from a natural gas line (owned by a local co-op) and that uses 40,000 gallons of propane per year. The farmer is interested in converting a grain dryer and barn heating to natural gas and talks to the local co-op about installing a new service line. The co-op stands to benefit from expanding their customer base and the farmer stands to save money by using natural gas instead of propane.

The farmer would pay for the parts, labor, and permits to install the service line and two meters from the co-op as well as new natural gas lines and burners for the dryer and barns. They may be eligible for a USDA grant and there is the possibility of selling the service line back to the co-op to eliminate maintenance costs. Challenges would include finding licensed contractors to complete the service installation and conversion of the heaters and dryers on the farm along with tracking the numerous points of contact and various services needed to complete the conversion.

Overall, the conversion project cost for the case study farmer would be approximately $36,000 with estimated fuel savings of $25,000 per year, with approximately just one and one half years before the farmer would realize the return on his investment. Obviously, the further a farm is from a utility or co-op natural gas line would increase the cost, while the more natural gas a farm uses would accelerate the return on investment.