Full Service Energy Farm
New Energy Farms Group CEO Dean Tiessen says his family-owned greenhouse vegetable production business, Pyramid Farms, has experienced dramatic changes over the past year. In response to those changes, he is switching from fossil fuels to biomass and has launched an energy crop company.
For years, Pyramid Farms faced volatile heating costs. “We were switching from bunker No. 6 oil to natural gas, back and forth, depending on what was cheaper,” Tiessen says.
In 2004, the company switched to woody biomass as a heat source, and finally saw some price stability. “Switching to biomass originally changed the way we did business and made us become profitable,” Tiessen says. “Going back to my father’s generation, he switched fuel all the time and each time had to invest in a different technology. In the greenhouse vegetable industry in Canada, about 40 percent of our operating budget is heat. So it can make a bad year really bad, or a good year with negative margins.”
Unfortunately, woody biomass utilization was a temporary fix. Utilizing waste wood as a fuel source became a trend in the region and the added demand created volatility in that market as well. “In our region, a few greenhouse owners put in biomass combustion facilities to heat their houses and it dried up the market,” Tiessen says. “We were once in a position where we were getting paid to take the wood, and then all of a sudden there was a shortage.”
Because the North American greenhouse vegetable business is exposed to competition from all over the world, including warmer regions in Mexico and Central America, a smart and competitive energy advantage is needed to stay afloat in the colder Canadian climate.
That prompted Pyramid Farms to produce and use energy crops to heat its tomato growing operation. Pyramid Farms currently operates about 37 acres of greenhouses in Ontario, and heats them with about 30,000 tons of biomass annually. The company’s ultimate goal is to fully heat its operations with energy crops, and is focusing on miscanthus for now. “Even though natural gas is currently inexpensive, we can only assume those prices are going to go back up, and the key is finding a long-term solution,” Tiessen says. “Purpose-grown crops were always in the backs of our minds, but the initial investment didn’t happen until 2007. We needed a long-term feedstock supply, and we couldn’t get a long-term supply contract for waste wood so we researched what the best crop to grow in our region would be and found that to be miscanthus.”
Pyramid Farms currently owns about 400 acres of miscanthus, but will need about 3,000 acres to completely heat its operations. While continuing to increase that amount, Tiessen, along with co-founder Paul Carver, have launched a new company called New Energy Farms Group.
Lessons Learned Overseas
The hardships Pyramid Farms faced were the driving force behind developing NEFG, according to Tiessen. The broadened purpose of NEFG, which currently has eight full-time employees and 50 to 60 background staff, is to supply products and services across the complete supply chain, from farm to end use, Carver says, often serving as the middle man or missing link in energy crop grower-to-end-user equations.
To cover all the bases, the company has three subsidiaries: Solmass Ltd., the research sector that works to provide new cultivars and collaborates with genetics companies such as Ceres Inc. and Mendel Biotechnology Inc., and develops machinery and crop production technology; New Energy Farms Ltd., which provides farmers with a scalable and cost-effective affiliate program; and Profeedstock Ltd., the off-take agreement developer that works with end users to gain long-term feedstock supplies.
Carver, who has a doctorate in miscanthus physiology and production, works in NEFG’s European Union branch and is seeing the bulk of activity. His location has earned him a great deal of experience over the past 15 years, as the EU is ahead of the U.S. and other countries in energy crop development and utilization. “In the U.K. there are a lot of dedicated power plants, and a lot of port projects are importing materials from Canada and the U.S.—plants that are 100 to 300 megawatts in size,” he says.
The EU is leading the pack because the country has a good combination of incentives from strong power prices for renewables and an actual carbon price, Carver says. “In the U.K., and many countries in the EU, an obligation has been put on large power companies to reduce carbon emissions, and though they are quite strict, it’s up to them how they do it,” he adds.
Carver says NEF is working to set up some of the first supply contracts with large coal plants that need to meet Renewables Obligations. “We’ve just had a heating obligation put into place but it’s taken many years to do that because it’s much harder to tell every company in the U.K. to reduce CO2 emissions from heating,” he says. “For electricity, if you tell 10 power companies they have to start putting out 10 percent renewable energy, it’s much easier to implement.”
Policy in North America still isn’t in place, Tiessen points out. “As it relates to a primary producer and end user, the best incentive to get people to come off the fence is the [Biomass Crop Assistance Program], but it’s flubbering around,” he says. “We feel that if it’s not successful, or were to fall apart, it will set the industry back.”
While the U.S. is focused on green transportation fuels, the U.K. is more committed to renewable electricity, Carver says. That emphasis has enabled NEF to gain first-hand experience and identify the key components needed across the purpose-grown feedstock supply chain, and to identify the challenges.
A common roadblock to growing energy crops is the high up-front establishment costs and delayed revenues. Tiessen and Carver say that NEF has found a way to remedy that. “We operate affiliate schemes through NEF and show farmers how to actually lift and replant their own crops, allowing them to cut establishment costs in half—50 to 60 percent of the cost that’s been published by academics,” Carver says.
NEF’s affiliate model offers an agreement to supply growers with information they need to be successful. “A person buys a small volume of initial material from us, and we show them how to propagate that, and expand it,” Carver says. “Then through Profeedstock, we can work with them to secure off-take contracts.”
NEF also provides advice about crop storage. “Typically, for long-term storage it will be baled, and we’ll help determine how to build these stacks and store them in the field,” Carver says. “Miscanthus can literally last for years outside once it’s baled. If it’s chipped, you may need to dry it down if you’re storing it in grain storage buildings, depending on the moisture content and the ambient air conditions. For compacted fuels, if it’s cubed, you’ve got to make sure it’s stored at the right temperature or it’ll fuse together.”
An affiliate can also supply plant material to others. Central Illinois New Energy Farms affiliate Eric Rund grows miscanthus, but also supplies plants to others in Illinois. “If we’re given a new variety, we put it through our rapid propagation sites in Tipton (Georgia) for testing, and then send it out to all of our affiliates who will evaluate it to determine if they’re interested in distributing it,” Carver explains. “This way, our customers have access to lots of good varieties fast.”
Historically, it takes five to seven years to bring new miscanthus varieties to market, but with rapid propagation techniques developed by subsidiary Solmass, Carver says it can now be done in less than two years. “That means we’re inside the development time frame for a new power station,” he adds.
On the end-user side, NEF will help work out the kinks. “Typically we can’t supply fuel at the start of a contract, and we have no means of supplying further fuel if we don’t have enough miscanthus,” Carver says. To solve that problem, the company has partnered with commodity trading companies to supply waste wood or wood residues initially. “That’s the bridge as we develop purpose-grown crops,” Tiessen says. “[The external biomass supply] handles year one to years four and five, then purpose-grown crops from year five to year 20.”
What an affiliate or grower needs to start planting miscanthus varies, whether it be plugs, roots or rhizomes. Tiessen says the best selection depends on the grower’s intentions.
Roots, Rhizomes, Plugs and More
Currently NEF sells plugs, roots and rhizomes, and the cost of each differs. Plugs are the most expensive option as they are the most mature plants. “If our customer needs to plant acreage for biomass production very quickly, the only way they can get fast multiplication is with plugs due to their higher rate of rhizome production,” Tiessen says. “Starting with rhizomes will be slower.”
Determining how much material a grower will need to purchase in relation to prices and volumes of biomass produced is region and climate specific, according to Tiessen. “Production capacity ranges on cultivars, conservatively it’s about 20 million Btu per acre [when harvesting].” In terms of electricity, with 35 percent conversion efficiency, that equates to about 400 to 450 acres of miscanthus per megawatt.
“We look at the region and its capacity to multiply the plants,” Tiessen says. “If you’re putting in a good, solid plug you’ll get anywhere from 20- to 100-fold multiplication over a couple of years of production, it just depends on certain agronomy issues. Generally speaking, for every acre of plants you’ll see a 20- to 50-fold multiplication in a short period of time.”
NEF conservatively estimates that 4,200 plants are needed per acre, or one plant per square meter, to ensure good establishment. “If you need miscanthus in 2014, you had better be planting rhizomes today,” Tiessen advises. “But if the plant won’t be opening until 2015, it’s more cost-effective to produce your own plant material.”
Overall, NEF affiliates will have a leg up over other growers. “A producer or supplier will have access to all the equipment and technology we have developed and also future technology that we think will really change how the market transacts.”
Author: Anna Austin
Associate Editor, Biomass Power & Thermal