Energy - you don’t notice it until the bill arrives. But when it does, especially if you happen to be responsible for the finances of a horticultural business, it can have a profound impact upon the good health of your firm.
The winter before last put a great strain upon growers of protected crops in particular, to the extent where some were even asking whether this was a viable industry to operate in. Optimism was raised again last winter when greater stability led to lower gas and electricity prices.
So what can growers expect this time around? Craig Lowrey, the head of energy markets research at the Energy Information Centre (EIC), maintains that there is cause for optimism that prices will be much more stable than they have been in recent times.
Lowrey says that many of the factors that led to the problems two years ago have now been resolved. At that time, a number of issues including a fire at the Rough gas storage facility, brief but severe cold spells and problems with the Interconnector played havoc with the gas prices.
But by 2006/07 new infrastructure had come online, the Interconnector began working properly and this, combined with a mild winter, led to prices falling considerably and much of the previous year’s concern subsiding.
And Lowrey is confident that trend will continue into this winter. “Looking ahead, we’ve got a much better supply/demand balance for gas. That suggests the UK will be okay,” he explains. “The new Norwegian gas field is due online next month, which has the potential to supply up to 20 percent of the UK demand. Upgrades to the UK infrastructure have also been completed.” Gas prices for this month are currently around 29p/therm, with a figure of around 44p/therm anticipated for the winter.
Lowrey warns that there have been some issues with the UK nuclear supply, which he says will ‘not be operating at full capacity any time soon’, potentially hitting the supply of electricity, but that overall the mood is upbeat.
The Interconnector is due back online following routine summer maintenance on September 18. Lowrey estimates that the UK gas storage position is similar to last year, with more than 90 percent of storage capacity full. “That is very good for this time of year,” he notes.
The two great uncertainties, and both are factors over which growers have no control, are the weather and global politics. The Met Office at this moment is unable to create a definitive forecast for the winter, but energy-intensive growers will hope for a mild season like last year to keep costs down.
Politically, world events continue to have a sway over the volatile global energy markets, making price predictions a risky business. “The UK relies upon liquified natural gas (LNG) to meet some of its demand, but because LNG is a global market it goes to where demand is highest,” Lowrey explains. “So an event like the earthquake in Japan meant that Japan’s nuclear network went offline and they were importing more gas as a result.”
Other recent events have also had short-term impacts, such as the US credit stock situation, which resulted in some of the investment bankers who were operating in the power and gas markets withdrawing their presence. And when, for instance, oil prices are hit, there tends to be a ‘sympathetic’ response from the gas and power markets, according to Lowrey.
He refused to be drawn though on whether it is better for horticultural businesses to take up long-term or shorter contracts, saying instead that it depends upon what is right for the individual firm. “If you want long-term budget security then take a fixed contact, but if you can manage the risk then a short-term contract could be for you. It’s a question of what you want.”
Chris Plackett of FEC Services largely concurs with Lowrey’s view. “If you look at the trends I would suggest that this year will be better than what we’ve seen in the past couple of years. That’s the way things are shaping up,” he says, adding the caveat that you can never be sure whether there isn’t some political storm just around the corner.
Plackett says that on gas winter prices are still falling, with last year a fair indicator of how this season is likely to turn out, although he does not expect prices to fall to the levels they were at three to four years ago. “But everything is working now with the Interconnector, and storage is fine. Things are looking good in terms of the long-term market.”
Two years ago many growers started looking at alternative fuel sources as a way around the soaring energy prices. Plackett, whose firm has undertaken a number of studies into the viability of alternatives, believes that growers are still interested in these options, but that the falling gas and electicity prices have taken the edge off the urgency.
“People are still very keen to look at the alternatives, but there is less of a rush now, which is no bad thing,” he maintains. “They are less likely to rush into things. If we look back to two years ago there was a lot of knee-jerking going on. Now, they are saying we have more time to decide.”
From the basis of FEC’s studies, Plackett believes that there will never be one single alternative fuel that stands out as the clear one to go for, particularly because of the large number of variables associated with them. Instead he suggests that it will vary very much according to individual circumstances.
One grower who took the decision to switch to an alternative source is Richard Harnett of Kernock Park Plants. His business has attracted a fair degree of interest from within the industry since officially opening a 3Mw woodburner at the firm’s site in Cornwall earlier this year. The boiler was designed to replace 13 oil boilers distributed around the 3.5ha of protection. It uses around 2,000 tonnes of wood chips to replace the annual 600,000 litres of oil needed to heat the glasshouses for young plant production.
Harnett has always maintained an open view of whether others should follow Kernock’s example, insisting that it is not for everyone. “Now gas has come down in price again and people won’t consider biomass at the moment. Another issue is getting the right quality of chip,” he tells Commercial Grower.
One of the major benefits of such a system is the environmental kudos it gives the business in the eyes of customers and consumers, a factor that weighs heavily in its favour. Against this is the slightly unreliable continuity of supply and the fact that the user must be sure that the chips are clean, as well as the fact that the small wood price has gone up around 30 percent in recent times.
Harnett also repeated his view that the UK ‘simply does not have the culture for biomass’, with an inconsistent supply chain making it impossible to replicate on a wide scale. In terms of savings, he is unable to come up with an accurate figure as it depends upon factors such as moisture content and the price being paid for the wood chips.
Harnett concludes that whether biomass works for you very much depends on the kind of business you are operating: with CO2 intensive crops such as tomatoes, cucumbers, chrysanthemums and roses it would work out too expensive for growers, particularly with payback likely to extend to several years.
In Kernock’s case, where a grant allowed the company to purchase the boiler, payback is likely to be reduced from eight years to four, making the investment worthwhile.
There is plenty of research going on to look at ways to farm more energy efficiently. The HDC has just announced that it has won £30,000 of funding from the Carbon Trust to set up an Energy Focus Group for growers of protected crops.
The project will be known as GrowSave, and will work with case study nurseries to implement and demonstrate how energy savings can be made. Experts from FEC Services will be working with two nurseries to identify areas of potential savings, with changes then implemented and the resulting energy use and crop performance carefully monitored.
“We will concentrate on the set-up and operation of the climate control computer and our focus will be on the correct implementation of temperature integration and thermal screens control,” explains Chris Plackett. “Both of these technologies are well backed by recent HDC research results and growers know that they can be used to make savings. All we need to do now is demonstrate how to use them correctly so that energy savings and crop performance can be optimised.”
The project will feature a dedicated website at www.growsave.co.uk, where growers who sign up will have the chance to access general energy saving information together with weekly updates on the progress of the case study sites. They will also have the option to input their own energy use information to compare their performance to the host nursery.
The HDC also reported in this month’s Energy News that a new four year HDC project, (PC 278), will investigate how air heating systems can contribute to energy savings and improved crop quality in UK greenhouses.
The work is a follow-on from the recommendations of a recently completed investigation into closed greenhouse systems, and will be carried out on a leading UK tomato nursery and will be managed by FEC Services.
Meanwhile new ways of managing power continue to spring up. One firm, Haven Power, recently launched an electricity supply service which it says is particularly targeted at small to medium sized horticultural businesses.
Haven is promising fixed price contracts and fixed monthly payments based on actual energy consumption and tailored to individual business needs. By fixing payments, seasonal fluctuations in demand can be spread over the year, making budgeting much easier, according to the company.
Haven guarantees that customers will have their meters read twice a year and is promoting the use of SMART Meters which are said to offer up to 10 percent savings with minimal effort.
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