It’s a perfect picture on a perfect day. A Claas chopper sends a steady stream of green rye into a tractor trailer while overhead, the main overland power line hangs in the blue sky.
It’s perfect too as a representation of the Mayer Energy Farm in Baden-Württemberg, Germany, where Norbert Mayer grows all his crops to feed his biogas plant, which then feeds power into the grid.
Germany is a world leader in the field of renewable energy. It introduced its first Renewable Energy Bill (EEG) in 2004, offering substantial incentives for the production of renewable energy, and it is now embracing a goal of producing 80 per cent of its energy from renewable sources by 2080.
Many farmers were quick to sign contracts to produce solar, wind and biogas energy. With the EEG2004 guaranteeing 0.55 euro (C$0.78) per kilowatt hour for the next 20 years, it seemed an easy decision.
Biogas seemed especially lucrative, so putting up a plant made a lot of sense at the time. After all, grain prices were still at their record lows, with wheat fetching only 80 euros per tonne (approximately $3.26 per bushel).
At those prices, energy definitely added more value to wheat than bread, which is why, by 2014, German biogas plants were producing more energy than two atomic power plants together, and a report by the Marktforschungsinstitute “Trend” in August 2013 found that more than 80 per cent of biogas plants and 21 per cent of solar plants were owned by farmers. Farmers were receiving more than one-third of the Renewable Energy Fund.
Norbert Mayer has turned all his crops into power since 2011. He made the switch to a biogas plant from a 3,000-head feeder hog operation when hog prices plummeted in 2009 and grain prices were still low.
There were several revisions to the EEG by then, and he was guaranteed a price of 0.25 euro (CS0.35) per kW-h. Mayer’s biogas plant produces 430 kW for almost 9,000 hours a year, adding up to 3.5 million kW. That’s enough power for more than 1,000 households.
“I produce more power than Stühlingen needs,” Mayer says of the nearby town of 2,000 people. Power is produced by fermenting biomass such as plant products or liquid manure. The resulting gas is converted into power, which is fed into the local power system. It sounds simple, but it’s actually quite a complicated system, with added complications from numerous regulations.
For instance, to be eligible for subsidies for a biogas plant through the EEG program, 60 per cent of the biomass must be produced on the farm. There must also be a clear plan with signed contracts for the spreading of the liquid waste, which is high-quality manure.
Mayer crops 225 acres, with corn taking 55 per cent of his crop, followed by sorghum, millet, wheat and triticale. When the corn and sorghum are harvested, winter rye is seeded which is silaged in the following spring, before reseeding to corn and sorghum.
Mayer still purchases a considerable amount of feed and he also buys liquid manure from surrounding farmers. By adding 35 per cent of liquid manure to the biomass he is eligible for a higher subsidy.
It’s clear he needs those subsidies to make it. In recent years, Mayer lost some of his rented land. Prices for land and rent have risen, mostly because of the nearby Swiss neighbours who can afford to pay more for land than the German farmers.
Rising grain prices and changing agriculture policy regulations such as rules on crop rotation have made margins slimmer. But Mayer can’t opt out now; he has invested too much.
“I could have built a dairy barn for 300 cows with the money the plant cost me,” Mayer says. Instead, he needs to inject funds into paying the biogas plant off before the 20 years of guaranteed prices run out.
Mayer built much of the biogas plant himself with the help of his wife and three children. His daughter Lisa, 21, is studying agronomy and wants to take over the farm. He formed a company with her for the farmland. This company then sells its crops to the biogas plant, which is operated by a separate company owned by Mayer and his wife.
As Canadian farmers will understand from this, tax planning is a crucial part of the job.
The regular market price for power is currently 0.02 euro (just under C$0.03) per kW-h. No one can afford to run a biogas plant for that. “In 20 years, when all the guaranteed price contracts run out, there won’t be any biogas plants,” Mayer thinks, adding, “With the new EG2014 regulation, new biogas plants became completely unattractive.”
Besides, the politics aren’t simple. When asked about the food-versus-energy debate, Mayer says, “It’s a crazy contradiction. On the one hand we’re accused of taking away food with bioenergy production. On the other hand the government pays farmers to take land out of production.”
Government agriculture programs foster extensive as opposed to intensive forms of agriculture, for instance by promoting flower meadows instead of top wheat production. For many average Germans, Mayer says, bioenergy has a bad reputation. Corn is tall, easily seen and considered a monoculture that jeopardizes biodiversity.
Mayer insists that other crops such as wheat are no different. “I don’t use anywhere near the chemicals as I did before I used our crops for bioenergy,” he adds.
Ludwig Käppeler, agriculture officer for the Baden-Württemberg district believes the food-versus-energy debate in Germany doesn’t add up. There is no food shortage anywhere, he insists. “Just look at the low price of flour,” he says, “and what don’t we all throw away!”
Käppeler insists it’s the Americans who are using so much of their corn to produce ethanol that it affects food prices. “If something happens on the global scene, like a major drought, prices go through the roof,” Käppeler says. “It’s speculation, not actual shortage, that makes prices rise.”
There’s another consideration too; 70 per cent of Baden-Württemberg’s farms are part-time operations. That has a lot to do with the way land was passed on within the family. Instead of one child taking over the whole farm, the land was split evenly between all the siblings, resulting in ever smaller parcels.
Efforts have been undertaken to merge land parcels, but the fact that much of the land is rented makes it difficult. Part-time farm operations are here to stay, Käppeler believes. But whereas farmers used to work in manual jobs such as bricklaying, where they could often take their holidays when it was time to make hay, today’s farmers often have more sophisticated jobs.
The system works as long as there are parents or a spouse at home who can manage the farm. Agriculture colleges are also now offering courses for part-time farmers, which are finding good resonance.
One way to improve farm income that requires little labour is to install a solar power system which sells to the grid. Markus Schaub of Dettighofen, Baden-Württemberg invested big into solar energy with the first EEG in 2004. That was a lucrative time with the highest returns. Solar energy panels, unlike biogas plants, require little maintenance once installed. After 20 years their output is still 80 per cent. There aren’t as many unknown financials as there are with biogas, and the return on investment can be easily calculated.
Schaub sells 234 kW-h into the grid, which generates 30 per cent of his farm income with the Baden-Württemberg district having the best total sunshine hours in all of Germany. Schaub’s large shed and barn roofs all slope in the right direction for maximum solar production. Almost all solar panels on farms are mounted on roofs. Germany has some fields of solar panels, but not yet on farms.
The Schaub farm lies idyllically among green rolling hills and small villages. The pastures are dotted with horses. Markus and his wife Birgitta board 100 horses in their stables, complete with a new riding arena. The horses provide 50 per cent of their income; the rest comes from growing seed crops on their 130 acres.
The solar panels are definitely the easiest money on the farm. “We need to rethink our strategy!” Birgitta exclaimed as she thought that over. “Solar power definitely outperforms considering the income versus labour and input ratios.”
Each change in EEG has meant a reduction in guaranteed prices for power produced. In recent years, however, the price of solar panels has also dropped considerably (once produced by German companies, the Chinese now make them much cheaper) so solar can still be profitable, especially for smaller businesses.
In 2014 Schaub added solar panels on a shed, producing 17.5 kW-h which he uses for the farm. It makes for a power bill savings of 40 per cent. “You have to rethink your power usage,” Schaub says. “We try to use our high-energy consumption items like the washing machine and oven during peak hours.”
Peak hours for solar energy are around noon. That’s also the hours of peak public consumption, a win/win situation. There are days now when Germany’s midday consumption is covered completely by solar power. The main challenge with solar energy is still storage. Research is working hard to find an answer but for now, storage ability is limited to batteries, which are expensive.
Schaub has less than 10 years to go on the EEG subsidy program. His solar plant will be more than paid for by that time, so he’ll still make a bit of money. But the good days will be over. Most German farmers are heavily dependent on subsidies, which make up 30 to 50 per cent of their income.
“Without subsidies I wouldn’t start the tractor in the morning,” Schaub says. Schaub farms 260 acres, half of which is pasture for the horses. That’s much bigger than the average farm size of the district. “I was fortunate that my father purchased land whenever it came up for sale,” Schaub says. He’s also lucky to be so close to the Swiss border. Most of their boarding horses come from Switzerland. For the Swiss, it’s much cheaper to board horses in Germany.
“The importance of the Swiss border can’t be overestimated,” Käppeler says. “The economic impact for German farmers is immense.” For Schaub it works positively, but for many farmers the impact is negative.
Like Mayer, many are losing land to Swiss farmers who are more than willing to pay a higher rent or land price. Käppeler can get passionate when it comes to good farmland along the border falling way to big shopping malls catering to Swiss customers. Many of Germany’s products, including food, are much cheaper than in Switzerland.
Times are tough, especially for the smaller German farmer, so it’s good that renewable energy production helps many farmers improve their income, Mayer and Schaub say.
If it’s going to continue to work for those farmers, however, politicians will have to keep being generous. Will they?