Statement Prepared by Roger Blobaum, Roger Blobaum and Associates
For The Hearing Of The
Subcommittee on Energy Conservation and Power
Committee on Energy and Commerce
June 28, 1983
My name is Roger Blobaum. I am the president of Roger Blobaum and Associates, Inc., an Iowa-based consulting firm that has managed several national and regional farm and rural energy projects. I appreciate this opportunity to comment on the importance of renewable energy and energy conservation to people living in rural America.
There have been better times to discuss renewable energy applications on the farm. Farmers are experiencing severe financial problems, with interest rates high and cash flow low, and are not likely to put money into renewable energy systems at this time. A poll of Iowa farm families this spring showed, for example, that few planned large purchases of any kind in 1983. Only nine percent planned to make a major farm equipment purchase. This is a major change for a sector of the national economy that normally accounts for at least $30 billion annually in outlays for farm machinery, equipment, and supplies.
Energy is an essential input for agriculture, which uses more petroleum than any other single industry. It accounts for about three percent of annual energy consumption nationally, equivalent to about 353 million barrels of oil a year. The energy input into agricultural production has increased fivefold since 1940. Most of this increase is due to mechanization and extensive use of farm chemicals.
The cost of energy used in rural America is higher than most people realize. A community energy planning project my firm completed in 1980 in Clearfield, Iowa, for example, showed that the people in that one small community were paying nearly $1 million a year for energy and that almost every dollar involved was leaving the community. The project covered about 700 people, including about 350 who live on nearby farms and rural home sites.
Rural areas also are the potential source of enormous amounts of renewable energy. A recent study prepared for the Solar Energy Research Institute (SERI), for example, concluded that 539 counties in 41 states have high wind energy potential. The potential for converting livestock manure to methane and corncobs and other crop residues to heat for drying grain and heating buildings is feasible but largely unrealized. These possibilities are discussed in the scientific literature and specific examples of on-farm applications have been described in articles in farm magazines.
Little has been done to help agriculture develop its potential to meet its own energy needs or to reduce its vulnerability to energy supply interruptions or price increases. It has been five years since the Secretary of Agriculture announced a goal of net energy self-sufficiency in agricultural production by 1990. Yet, the overall USDA energy plan started at that time has never been completed. The Office of Energy, set up initially to coordinate all USDA energy-related matters, has had neither the funds nor the status it needed to do its job right. Congress has also been remiss in failing to follow up to make certain that this important effort was being carried out.
An assessment of the status of federal support for agricultural energy programs that my firm prepared last year for the Renewable Energy Institute (REI) documents drastic cuts in money and commitment. It describes how this administration has, for all practical purposes, abandoned the federal effort to facilitate the adoption of renewable energy applications in rural America. We are offering a copy of this unpublished report to the subcommittee and urge you to make it part of the record.
Congress did not make the right decision, in my judgment; in having DOE and USDA share responsibility for assuring adequate supplies of energy for agriculture and improving the energy efficiency of agricultural production. Although the two agencies have operated under a memorandum of understanding, the level of cooperation has fallen far short of what is needed. The uncertainty of DOE’s continued existence as an agency and the budget cuts made in renewable energy programs in 198l and 1982 have made matters worse.
The goal of energy self-sufficiency in agriculture is too important to be left to administrators caught up in the usual inter-agency turf battles. These agencies sometimes appear to be spending more time negotiating the terms of their joint activities than they spend implementing public policies and serving the needs of rural America. It is time to end this by putting responsibility for all agriculture-related energy programs in a single agency. Congress should complete the phase-out of DOE’s involvement in this area and give USDA a clear directive and adequate funding to implement the energy self-sufficiency commitment made five years ago.
The federal government also has a continuing responsibility to help remove institutional and other barriers to adoption of renewable energy applications in agriculture. Although considerable work has been done on non-agricultural applications, such as utilizing solar in residential buildings, little has been done to address this problem in agriculture.
One of the most important considerations is the strong tendency of farmers to stay with proven technologies until convinced that adopting an alternative would be both economically feasible and technically reliable. This risk abatement response is a critical factor in all farm management decisions. It is a much less important factor in areas like the farm home, where crop or livestock production is not involved, or in situations where a backup system remains in place.
Probably the most effective way to address this barrier is through on-farm demonstrations that test both manufactured systems and those built by farmers themselves. Demonstrations also provide an opportunity to collect data and monitor performance. Unfortunately, nearly all the federal support for on-farm demonstrations was eliminated at the same time much of the research work on systems designed for use by farmers was nearing completion.
Another important barrier is the perception that renewable energy systems are less reliable than conventional systems. This applies specifically to higher-cost manufactured systems that have not been tested under actual farm conditions. A lot of money is at stake when pigs are farrowed or grain is dried and most farmers are unwilling to take a chance with a system that may break down or perform at a level lower than promised.
This perceived reliability problem can be largely overcome by establishing a network of dealers providing renewable energy sales and services in rural communities. The needed services include maintenance, repair, and warranty work. The need for these specialized services is even more critical for alcohol and methane systems, where both biological and mechanical problems may develop.
The Small Business Administration could help in this area by making small loans to business people who want to establish energy stores or to existing businesses that can take on a renewable energy dealership. The potential for businesses of this kind in agricultural areas is described in a recent In Business article entitled “Rural Energy Market Place.” I believe this article would be a valuable addition to the hearing record. It is likely that businesses like the one described will eventually become as common in rural communities as those that now provide television sales and service. But little progress has been made in this area so far and, with the agricultural economy in the shape it is in, even the small gains made thus far may be lost.
Another way to address this is to concentrate on renewable energy systems that supplement conventional systems rather than those that replace them. This includes systems that pre-heat air or water, for example, or wind-powered generating systems that are tied into the local grid. When risk is alleviated in this way, the reliability barrier becomes much less important.
Risk can also be reduced when farmers build their own renewable energy systems. Owner-built solar grain dryers and solar heaters built into the south-facing roofs and walls of agricultural buildings can be constructed at low cost and perform well. Our experience in providing technical and other assistance to twenty-four farm families in a national research and demonstration project showed that they liked these low-cost systems because they were not too complicated, were reliable, and required a minimum of attention. These farmers wanted simple systems they could build, maintain, and repair themselves. A copy of the report on this 39-month effort is attached for your use and possible inclusion in the hearing record.
Another important obstacle, and one that receives little attention, is personal preference. Unlike most industries where decision-making is centralized and institutionalized, agriculture involves more than 2.5 million decision-making units that must be convinced before a sale is made. They also know that adopting certain systems, like one that converts livestock manure to methane, involves a commitment to keeping a large number of animals at least until the system has paid itself off.
It is also important to note that what is usually involved on a farm is the substitution of renewable energy for fossil fuel rather than an attempt to fill an unmet energy need. The wind chargers that were installed on so many farms in the 1930’s did fill a specific unmet need–to have electric lights like people in town. Farmers now have the full range of energy-related services delivered in an efficient and convenient manner and the advantages will have to be substantial to get them to switch to a renewable source of energy.
Another barrier is the difficulty of obtaining long-term financing for renewable energy systems in rural areas. Policies covering livestock, farm machinery, and operating loans, for example, do not fit the financing needs of most renewable energy systems. Many lenders are also unsure of the collateral value of renewable energy property and often assign a high risk rating to the loan. What is needed is an educational effort designed specifically for rural lenders. It would help them ask the right questions about renewable energy systems, apply accepted financial analysis methods, factor in the energy tax credits a farm customer is entitled to, decide when a feasibility study is needed, and help farm customers set up energy record-keeping systems.
The government’s role as a lender could be greatly expanded through revised Farmers Home Administration guidelines that included renewable energy improvements to qualified buyers. More funding should be provided for the Small Business Administration’s direct loan program for new and expanding renewable energy businesses. Congress should also continue to provide funds for the Solar Bank.
Perhaps the most important barrier of all is the difficulty farmers have in obtaining the kind of information they need to make farm-specific decisions related to renewable energy. Although ample information is available, it is often considered too general or too technical to be applied to a specific farm situation.
An important step in helping farmers make energy-related decisions for their own farming operations is to use farm energy audits that show the amount and type of energy used and the on-farm energy resources available. With this kind of information it is not that difficult to go a step further and determine the cost effectiveness and appropriateness of a range of renewable energy options for a specific farm. This process can be facilitated by the use of computer programs designed to handle information farmers need to make management decisions related to renewable energy technologies. A farm energy plan, much like a soil and water conservation plan, would complete this farm-specific renewable energy approach.
To accomplish all these needed changes, Congress should enact the SENSE Act. This bill does a good job of embracing and clarifying the advantages of renewable energy. Enacting it would be an important first step in the formation of a consistent and comprehensive national energy policy.
R. Blobaum, Statement at the Hearing of the Subcommittee on Energy Conservation and Power Committee on Energy and Commerce Washington, D.C. June 28, 1983. Summary: Discussion on renewable energy applications on the farm.