California nut processors are facing soaring energy rates with no relief in sight.
Costs for electricity to operate machinery and light buildings, natural gas or propane for drying nuts and fuel to operate vehicles are assuming a larger share of their operating expenses.
Michael Boccadoro with the Ag Energy Consumers Association told Western Agricultural Processors Association (WAPA) members and guests at the association’s annual meeting what many already knew: commercial and industrial energy rates are twice the national average and rising faster than the national inflation rate. He predicted the trend would continue.
Between 2011 and 2017, Boccadoro said, electricity prices in California rose five times more than the rest of the U.S. California commercial and industrial rate payers are being charged 14.28 cents per Kwh, while in Arizona and Nevada, the rate is less than six cents.
“This puts us [agriculture] in a difficult situation,” Boccadoro said, “but the PUC is focusing more on residential rates.”
Renewable energy goals and expanding climate policies are two of the drivers of the skyrocketing energy prices. Moving to net zero emissions will be costly, and there is a sense of urgency from the government. An ambitious ‘decarbonization’ plan for California will also impact energy costs, he added.
The Public Utilities Commission is not interested in bringing down costs, he said, but is focused more on shifting solutions to air quality goals. Drought conditions in the state and lack of cheap hydroelectricity are making the problem worse.
Utility mismanagement and perverse incentives have also had a huge impact on energy prices, Boccadoro said. PG&E has saved money by doing less system maintenance, but now rate payers are bearing the burden of higher costs as they upgrade systems. Wildfire mitigation and legislative mandates are two more drivers of higher energy costs.
Boccadoro’s presentation showed 10-year compound annual growth rates (nominal) for energy prices.
PG&E electricity is 3.2%, natural gas at 6% and gasoline at 5.4%. Edison and SoCalGas is 3% for electricity, 6.2% for natural gas and 5.4% for gasoline.
Proposed solutions are problematic and pending legislation will exacerbate the problem, he said.
Legislative mandates include using off-shore wind energy, but Boccadoro said that solution is not going to be cost-competitive.
There are some emerging opportunities for agriculture, Boccadoro reported. There is increased funding for energy efficiency and self-generation as well as a food production investment program. The agriculture industry has lost much of its clout in this state, he added, but regulators need to be reminded that if agriculture fails, the state fails.
Among nut processors attending the WAPA meeting, strategies for energy conservation abound. Use of solar to offset electricity costs has been a major investment for most processors.
At Horizon Nut in Tulare, a grower-owned processing facility, natural gas is used for roasting. At the facilities in Firebaugh and Lost Hill, it runs the dryers. August through November is the high energy use period.
Kirk Squire, grower relations manager at Horizon, said even with the larger pistachio harvests, the company has been able to cut their total annual energy use.
“Energy bills are huge during hulling,” Squire said.
As many other nut processing plants have done, Horizon turned to solar energy. In 2017, the company’s Firebaugh plant began using solar energy that can be transformed into heat and used in drying, steam pasteurization and cleaning.
Other energy savings come from turning off cold boxes during the winter, use of skylights for natural light and motion sensor lighting.
At Olam-owned Hughson Nut Inc., almond processing consumes the largest share of energy costs.
Outgoing WAPA Chairman Butch Coburn and Hughson Nut plant manager said similar energy saving strategies are used at all three of Hughson Nut facilities.
The Hughson plants are in the Turlock Irrigation District, which supplies power at lower rates than major suppliers, Coburn said. One of the Hughson plants, Verduga, uses solar power.
Huller and sheller Central California Almond Growers Association (CCAGA) has invested heavily in solar power to supply energy needs at their facilities. The price of energy is increasing, said CCAGA President and CEO Mike Kelley, but those costs are being mitigated by conservation measures.
Five years ago, he said, energy costs consumed 12% of their operating expenses. Today, that figure is 9% due to conservation and use of solar. The plant has also invested in new technologies for vehicles used at the plant. In the future, Kelley said they would look at converting forklifts to battery power.
Pistachio processor Primex was one of the first plants to adopt solar power to meet energy demand in 2010, said CEO Ali Amin. Their solar installation generated 40% of the power at that time, but as energy demand has increased at the plant, the percent is lower.
Primex would install more solar to meet energy demand at the plant, Amin said, but more ground space is needed.