Saving $50,000 in energy costs could be equivalent to increasing crop yields by $1,000,000.
But let’s face it: energy costs aren’t the first thing a grower thinks about when running their farm.
Energy is Costly
There are so many inputs to juggle in terms of operational costs: regulations and compliance, labor availability, equipment status, seed and soil composition, nitrogen application, irrigation schedules, and water availability, to name a few. Energy is usually an afterthought and often viewed as a fixed expense or just a “cost of doing business.”
But in our experience, one of the main reasons growers don’t focus on energy is a general lack of access to actionable data. For most growers, their only interaction with energy costs is by receiving bills every month, then handing them to their accountant or bookkeeper for processing and payment.
What many growers don’t know is the impact that even small changes in energy usage can have on profits. By closely monitoring irrigation schedules, adjusting utility rates, or by keeping up with scheduled pump maintenance, growers can save tens of thousands to hundreds of thousands of dollars per year.
Energy cost savings may not directly improve crop yields. But energy cost savings are a powerful multiplier that can increase profits and net operating income of the business. And this in turn increases a farm’s asset value which can have the same effect as producing higher crop yields.
A California Grower Example
Could $50,000 in energy cost savings really be equivalent to increasing crop yields by $1,000,000? Sounds crazy, right?
Let’s assume a strawberry grower in California spends $250,000 per year on energy bills. Our strawberry grower may be facing heavy pressure on operational expenses and is happy to earn 5% in annual net profit margin. But through various energy saving efforts our strawberry grower reduces his energy bill by say 20% per year or $50,000 in cost savings.
So what does that $50,000 in energy cost savings really do for him? By working backwards, every dollar saved through energy efficiency efforts has a 20x impact on top line revenue:
$50,000 in energy savings / 5% net margin = $1,000,000 impact on revenue
To put it another way, our grower who saved $50,000 would have to generate $1,000,000 in equivalent revenue to realize the same impact on his business. Do you know many growers who can suddenly acquire more farmland, grow more crops, find more labor and earn another $1,000,000 in revenue? Wouldn’t it be easier just to maximize your efficiency with the farmland and staff that you already have?
Energy Efficiency Investments are Quantifiable
The best part for decision makers behind energy efficiency investments is that the return on investment is verifiable. By tracking energy bills and usage before and after an energy efficiency investment, growers can calculate what the direct impact was on their bottom line.
After all, making decisions that make your company more competitive and more profitable is what smart business is all about.
If you’d like more info about how Wexus can drive energy and water efficiency across your farming operation, please contact our Business Development team at business-development@wexusapp.com or 415-429-6038.
Rob Blumenfeld is a Business Development Manager with Wexus Technologies Inc. Rob has many years of experience bringing efficiency solutions to market in the ag industry. When not working with customers to drive energy and water efficiency, Rob enjoys catching waves on his bodyboard on the California coast.