In our new sustainability series, in partnership with NatWest, we take a closer look at why understanding energy costs can help farmers significantly improve overall business efficiency.
It is the invisible costs which can sometimes be the biggest burden on the profitability and sustainability of a farm business.
The past year of extreme weather – sub-zero temperatures last March followed by the relentless summer drought – combined with the weakness of the pound, has led to significant increases in farm costs.
According to Defra’s Agricultural Price Index, fertiliser prices were 23 per cent higher than a year ago, motor fuel prices had risen by 20 per cent, and energy costs had recorded an increase of 16 per cent year-on-year.
The last of those three, energy, is one that many businesses, including agricultural ones, may be failing to appreciate the potential cost savings from addressing.
In 2016, YouGov and Scottish Power questioned 1,000 small-and medium-sized businesses on energy savings. The survey revealed 60 per cent did not regard energy efficiency as a priority and only 10 per cent carried out an energy audit every year.
But larger companies are taking the issue more seriously. NatWest’s report, ‘Mid-market Britain 2018: the view from the boardroom’, published last July, found two-thirds (66%) of the middle-tier of UK companies had carried out an energy efficiency audit at some point over the past three years.
More than eight in every 10 of these businesses (83 per cent) said they had invested in staff with training relating to energy efficiency and sustainability business practices.
Overall, the report found the larger a business is, the more likely it is to concern itself with www.fginsight.com/natwest/sponsored-natwest-sustainability-2019-articles/british-farmers-should-be-viewing-the-environment-as-another-crop-81956">sustainability and the efficient use of resources.
Ian Burrow, head of agriculture and renewable energy at NatWest, says: “There is no doubt that energy is a significant cost for farms of all types and sizes, and one that we have been happy to help many businesses benefit from getting to grips with.
But it has been a trickle down process that is now waiting for everyone to catch up on.”
For farm businesses, energy efficiency has tended to get somewhat overshadowed in recent years by the interest in renewables and on-farm energy generation.
Farm owners are usually taking steps to be more energy efficient, but are reluctant to make bigger investments.
Jon Swain, a consultant at NFU Energy, says: “It is not as interesting to save money as it is to make money. Putting solar panels on a roof is visible, but spending £10,000 on a heat recovery unit is not seen as exciting.
”The most energy-intensive sector is commercial horticulture, with the high heating and lighting needs of greenhouses. They are also most likely to be taking energy efficiency most seriously, says Mr Swain.
Dairy farms are lower energy users by comparison, but given the low milk price it can be a big proportion of costs.
The three most commonly found issues found on-farm are: time switches not set properly, so lights or equipment are on at wrong time; general maintenance and wear and tear on equipment, for example, fans; and the tendency to keep things working rather than replacing with new equipment.
While an increasing number of farms are undertaking an energy audit, Mr Swain says it is usually only to fulfil, for example, a supermarket supplier agreement.
“It is very rare to see farms doing energy audits for their own reasons. It is a stick-based economy rather than people really seeing the value of it. I would love that to change. “There are so many big opportunities for savings.”
An energy saving audit involves bringing in a third-party expert to analyse on-farm energy usage.
They can also advise on what measures could be implemented to meet the latest legislation, reduce power bills, increase efficiency or even create new income by generating renewable power on-site.
Even buildings as little as three to four years old will be behind on current efficiency technologies and improvements. Mr Swain says an energy audit will make 10-25 per cent savings on farm energy costs.
Farm businesses will need to provide the auditor with information, including current billing arrangements, size of buildings, staff numbers and machinery in use.
Auditors would then spend time on-farm before filing a report and organising a follow-up meeting to go through the conclusions.
But before even booking an outsider to come on-farm to do an energy audit, farm owners should take three simple steps first themselves, says Mr Swain.
“Understand what your energy consumption is, how much you are paying for it and when you are using it.
That is step number one. Most farmers have a decent idea of where they are using it, but sometimes they are wrong.”
“Despite what we might think, do not always blame the biggest piece of equipment. “You can have the largest piece of equipment in the world, but if it is only on a few times a year, it might be the heater in the toilet that is never turned off that uses the most energy on-site.”
Focusing on the biggest and most obvious problem is common across all businesses. Farm managers may simply not realise the benefits of introducing even quite basic energy efficiency measures.
LED lights, for example, consume 80 per cent less electricity than traditional incandescent bulbs, occupancy sensors can automatically turn off lights, heating systems can be adapted to only come on below a certain temperature, and insulation can cut overall heating needs.
Staff can be a crucial part of making energy efficiency work too. Team members need to be involved and motivated to help take those daily steps and behavioural changes which will make a farm businesses more sustainable.
Mr Burrow says: “For all farm businesses, the ambition should be to make the invisible spend visible.
To work out what your energy costs are and where you are leaking the most spend. Once you have audit information and advice, it is up to you as the owner to decide and then make the necessary changes work.”