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Tuesday, April 07, 2009

The Energy Farm Concept for Small and Medium Producers

The energy farm, containing multiple "cash crops" on the same block of land has become a reality, at least on a large scale. Chances are, you've seen the large wind turbine farms, miles long, with massive wind turbines configured to maximize electricity generation and then to deliver it into the grid at wholesale prices. They are often combined with solar panels to collect energy on days where there is insufficient wind, and the farmland is planted in switchgrass, which is sold to biofuel refineries that make cellulosic ethanol. It's a vision of the future, and, thanks to incentives, it's happening quickly.

However, while the big energy farms are very impressive, the economies of scale are not suitable for small and medium producers.

For most small and medium-sized oil and gas producers, an ideal solution would involve generating electricity, steam, and other energy products by means of small-scale wind, solar, and geothermal energy. The goal would be cost savings, new revenue streams, and even new potential operations (enhanced oil recovery, or saleable cash crops, for example).

To find a solution requires a multi-pronged approach involving the following elements:

* Tax credit grant (Recovery Act provision for 30% credit, payable by the Treasury Department)
* Appropriate scale of energy-generating technologies
* Contracts with local or regional electricity provider in order to sell back into the grid when there is a surplus
* Agreements with land owners, royalty owners, members of producing unit (when applicable)
* Government funding for pilot programs, new technologies, and processes for renewables (through the Recovery Act)
* Local or state incentives (economic development, infrastructure development, etc.)
* Carbon emission reduction on your lease (avoiding fine or tax)
* Carbon cap and trade considerations (bonus for blending renewables with fossil energy consumption or production)

Further, the applications have to be useful to producers, and they have to be small, easily maintained, and affordable.

Wind Energy: Generate either three-phase or single-phase electricity, to charge batteries, to power equipment, or to send into the grid. Wind turbines should be the appropriate size, with few moving parts, rugged enough to last 20 - 30 years with little maintenance, and affordable. The manufacturer must be reputable, and not make unrealistic claims, and should provide solid technical support for installation, expansion, and maintenance. Example of small wind turbines:

Solar Energy: Panels can be used to provide electricity for light applications, and to charge batteries.

* cathodic protection (corrosion control monitoring)
* monitoring equipment
* telecommunications
* solar pumps

Geothermal: Heat exchangers can maximize the energy derived from geothermal zones. Steam may be connate. Alternatively, produced water can be injected into the geothermal zone, where energy is produced.

* produced water injection (in the case of marginal wells, etc. with a need to dispose of salt water)
* produced water can be heated
* surface water injection (to heat the water)
* water from geothermal zone hot enough and contains enough energy used to power steam generation
* steam flood (enhanced oil recovery) in the case low-gravity oil

Biomass: Switchgrass and other ecosystem-appropriate crops can be grown on the leasehold surface. The crop can be sold to biofuel / biodiesel refineries, or traded for other crops. In some cases, the crops that are not sold to a cellulosic ethanol producer can be sold as feedstock for cattle or other animals.

How do I get started?

1. Make an inventory of your property: location, size, available resources, your needs

2. Determine where you are in relation to a grid or system where you are able to sell back your excess energy or to trade

3. Determine your needs, and the economics of your energy production. Be sure to inventory all possible gains: tax credits, trade possibilities, saving / replacing purchased energy, cap and trade, savings on carbon emissions tax / fines.

4. List the kinds of renewables you can produce on your property, and explore the vendors of each

5. Work with a consultant to find an integrated solution that is not weighted too heavily on the side of one renewable, but accurately and economically reflects the real conditions of your land, your production, and the economic environment. Focus on sustainability.

This should help you get started – at least to start thinking about possibilities. It is important to work with reputable consultants who have experience in the area you are involved in. Likewise, it is important to make sure your equipment dealers and manufacturers have experience and a good reputation.

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