With the increasing costs of imported heating fuels (oil, natural gas and propane), residents of St Lawrence County will be looking for ways to save on heating bills. For many in rural areas outside the towns, wood heat will provide a good alternative. The problem is that burning wood on any large scale in the towns and villages may not be practical. The outdoor wood burners are currently facing zoning exclusion in the higher density population areas because of problems with smoke. Even conventional wood stoves and furnaces may pose problems because towns and villages may not be able to tolerate the increased smoke and fire risks associated with wood stoves, especially ones that are not properly managed and maintained. Most townspeople may not have the time and patience to go back to burning wood. Pellet stoves burn clean with no creosote and very little emissions because the burn is controlled by the furnace feed of pellets and not by restricting air flow like in a wood stove. Burning pellets could provide a low cost heating alternative that is safer and easier to maintain than a wood stove and much closer to the currently used heating systems.
So where does pelleted hay fit in? We have a lot of acreage in underutilized hay land in St. Lawrence County and hay pellets could reduce heating costs while keeping heating dollars in the area. If we move towards pelleted hay we will face a critical choice between a centralized hay pelleting operation and smaller portable hay pelleting systems.
In a centralized Hay Pelleting System a large (high initial investment) stationary hay pelleting operation is set up in one location. It would be advantageous to a centralized pellet plant to locate the plant next to the St. Lawrence Seaway and rail lines to access the export market. Given the size of a centralized pelleting operation it is most likely that investment of this scale will come from outside the county. With the current shortages of energy in the global markets and given a probable location next to the Seaway, it is highly likely that a centralized operation will be focusing on export markets. This will form the basis of an economic system where local farmers will sell a raw material (baled hay) at wholesale prices to the central plant. Decisions regarding the price given to farmers, the final sale price of the pellets and where the pellets are sold would be made by pelleting plant owners and their investors. The pellets and profits produced in large centralized pellet operations are often exported outside the areas of production.
In a portable Hay Pelleting System, independently owned portable hay pelleting units would go from farm to farm pelleting hay on site for the farmer for a fixed price per ton. This process adds value to the farmers' hay and leaves the farmer the hay pellets and the decision how to sell them. This will form the basis of a hay pelleting economy where local farmers could sell to markets surrounding their farms. When the hay pellet economy becomes established locally the opportunities for pellet distributers will expand. A number of businesses will be in a good position to distribute pellets to customers. Pellet stove stores, hardware stores, companies currently delivering oil, and independent truckers will all have opportunities to move into the pellet distribution business. This will provide new business oportunities in pellet distribution and options for farmers who do not want to store hay pellets on their farms to sell their pellets directly to pellet distributers. Bids could be taken and contracts given for distributers to pick up the farmers' pellets from their farm as they are produced by the portable pellet operation. For those farmers looking for alternatives to dairy and new sources of income, bagged hay pellets could be stored on pallets in barns no longer used for dairy (or possibly stored in bulk in unused silos) and sold directly from the farm to customers who would pick up pellets at the farm. Some farmers might decide to get into the business of delivering their pellets to their customers. By avoiding the need to move bulk hay long distances to centralized pelleting and then moving the pellets back to customers who may live right next to the farm where the hay was produced, portable pelleting cuts down dramatically on transportation costs. Prices for pelleted hay are set by the farmer and compared to selling hay at wholesale prices to a centralized pelleting operation, farm pelleted hay could give increased profits to the farmers and lower heating costs to the townspeople while keeping money in the local economy that was previously leaving the area for imported heating fuels.
A Portable Hay Pelleting economy could create many off farm jobs to install, repair and maintain new pellet stoves and pellet machines. Local colleges like St. Lawrence University and SUNY Canton and other colleges with sustainable energy programs could benefit from increased enrollment. SUNY Canton could expand programs to train technicians for this new industry. Clarkson University could work to improve the design of pellet making machines and hay pellet stoves with possible commercial spin offs. Portable pelleting units could create new custom pelleting small businesses or cooperatives of farmers. A portable hay pelleting system could divert much of the money that currently leaves the county in heating costs each winter back into the local farm economy and help the townspeople with lower heating costs. This could be a significant economic benefit to the whole county. Portable hay pelleting has a very good profile in terms of the environment and global warming. Hay for pelleting could use marginal hay land that is currently going out of production, ash from pelleting could be reapplied to agricultural land, and hay regrowth each season would reabsorb the carbon released in burning the previous year's pellets.
In order for a local economy based on hay pellets to work, a significant number of people need to be making a living income from pellets. Few if any farms could make an income selling bulk hay at wholesale prices to a central pelleting operation because the farmer has no opportunity to add value to his hay. In contrast, in a portable hay pelleting operation the farmer ends up with the finished product, hay pellets. Pelleting and processing hay into pellets is a highly seasonal operation, primarily focused on late summer. As farmers diversify into pellet production they will have more time during other parts of the year to move into new farm production areas. For example, as the cost of oil increases, the cost for transportation of farm produce shipped in from outside the area will also increase. This will give an advantage to farmers selling locally produced food. With the work cycle of pelleting operations focused primarily on late summer, pelleting farms will be able to move into producing food crops for local consumption on their higher quality tillable land. This could replace the farm work normally done to produce feed for animals in a dairy operation. In addition, as grain corn prices have risen dramatically (doubled in the past few years) locally grown grain corn could start to replace silage corn in crop rotations. This corn could be sold to other local farms still in dairy and could fit into the newly emerging pellet farm operations giving them the option of raising meat for local markets. With increasing oil and transportation costs pellet farm operations could have options of moving into a mix of local vegetable and meat production, and value added operations to supplement and diversify their pellet operations. Based on the size of each farm and its work requirements each farm could choose a different mix of local production operations that best suits its unique situation and market conditions. For example, St. Lawrence County currently uses about 1 million chickens a year. In the past this area had numerous chicken and egg production operations. Portable pelleting could form the economic basis of a whole new farm economy based on local food and energy (hay pellet) production that would not be available to farmers selling bulk hay to a centralized pelleting operation.
When thinking about a sustainable local economy we need to look to the future to see what conditions a local economy will face. Let's take a look at hay pelleting. Long term the price of oil will increase as an increasing world population will need more oil from a limited supply. As the cost of oil increases the value of hay pellets as an alternative heating fuel will increase. In the past 12 months in St. Lawrence County, heating oil and propane costs have gone up 40%. Let's look at what happens to a local economy based on portable hay pelleting as oil costs rise. According to Cornell, the energy conversion efficiency (energy out: energy in ratio) for grass pellets is 14 to 1. That is for every 14 units of energy produced only 1 unit of energy is needed. Most of the energy input is for the harvesting and processing the hay into pellets and that comes mostly from oil (ie: fuel for tractors, pelleting etc.) For purposes of easy discussion let's take a conservative estimate of 10 to 1 and look at where the energy comes from in hay pellets. Hay collects sunlight and converts it into the plant material in the hay. The energy in hay is all solar energy. The solar energy is essentially free, the costs come in growing, harvesting and processing the hay into usable pellets. Assuming a 10 to 1 energy conversion 10% of the energy in finished hay pellets came from the oil used to grow, harvest, and pellet the hay. 90% of the energy in the pellets came from the sun at essentially no cost. Hay pellets and pellets in general will sell for somewhat less than oil to make it attractive as a lower cost alternative to oil. As oil costs rise we can expect the price for hay pellets to also rise in proportion to oil as it stays somewhat under the current cost of oil.
Let's use this past year's increases in heating oil prices of 40% as an example of what happens as oil costs rise. What would happen to the economics of hay pellets under a 40% increase in the cost of oil? With a conservative 10 to 1 energy conversion ratio for hay pellets, we know that only 10% of the energy in the hay pellets comes from oil. The rest comes from solar energy and does not change in cost as the cost of oil rises. Since hay pellets only have 10% oil energy then 10% of the 40% increase of oil will show up in the cost of hay pellets. A 40% increase in the price of oil will only lead to a 4% increase in the cost of hay pellets. A 100% increase in the cost of oil (doubling the costs) will only lead to a 10% increase in the cost of pellets (10% of 100% = 10%). This is a very significant economic factor for farmers growing hay pellets. It means that a significant increase in the price of oil will lead to a very dramatic increase in the value of the farmers pellets with very little increase in the costs of production for farmers. The difference in the costs are more profits to the farmers. Once portable pelleting starts locally, increases in oil costs will dramatically increase the number of farmers growing pellets for local use. As more farmers grow pellets locally the competition between farmers to sell to townspeople will keep prices for pellets well below market prices for oil. This will give townspeople a good deal on locally grown pellets while still giving local farmers an increasingly good return on their pellet operations. Combined with the option of filling in the non pelleting season with food production and food value added operations, farmers in St. Lawrence County will have the opportunity to move into a rapidly expanding local farm economy. This will not only rechannel money currently leaving the area in heating and food import costs but provide many new jobs related to pellet stove and pellet operations while will providing affordable heat to townspeople in the face of rising oil costs.
There are now ongoing discussions on a possible role for small local stationary pelleting units where farmers in neighborhoods who are willing to transport their bulk hay could bring it to the pellet operation for pelleting then store it there to sell to local pellet distributers. This option may have potential if the pellet operations are small, local and farmer owned. The key to moving to a local pelleting economy is that the farmer needs to own the finished product and the system has to be decentralized to spread out the income from pelleting to many small businesses. The risks in moving to stationary pelleting lies in the fact that there is great opportunity for a lot of money to be made in capturing the pellet market and lessening the farmers' role in the pelleting operation. In addition, stationary pelleters brings new issues related to size and the possiblity of less local control. For example, if economies of scale gave advantage to larger more centralized pellet operations then larger amounts of capital would be needed to fund those projects. This would lead to more dependance on outside investors and a larger percentage of the profits and more control going to them. At some point, if stationary pelleters became regional at a scale of only a few (or one) central pelleter per county then that could pose a serious problem. Farmers would be limited by the high cost of long distance transportation for moving their bulk hay to other areas to get their hay pelleted. Under those conditions, there would then be very strong economic incentives for pellet operations to move towards taking more and more of the profit either directly by deciding to buy hay wholesale or by continuing with custom pelleting but increasing the cost of their pelleting services to the point that farmers may end up owning the pellets but most of the profit is going to the regional pellet operation. An economically viable core of portable hay pelleting units could prevent any centralized pellet operations from taking over the local pelleting economy because the portable units could move into areas facing very high pelleting costs and provide competition. Portable hay pelleters could, however, only provide this service if they are still in business. Large centralized pelleters could choose to undercut small local pelleters for short periods of time to capture the market and then raise prices as their competition disappeared. Considering the potentially large profits involved, farmers have to be very careful not to find themselves in the position where one centralized regional pelleter ends up setting the price for pellets and farmers sell them hay at wholesale prices because there are no other local alternatives. Unlike the very clear advantages we have seen in portable hay pelleting, there are a lot of questions that still remain in moving to stationary pellet operations even if they start out as farmer owned. We need more study and discussion of the possible impacts. The question remains: How small and local do we need to stay before we tip the balance away from the farmer owning the pellets in a local pellet economy and the pellet operations owning the pellets in an export economy?
The key to this operation is portable hay pelleting. Remember in a centralized hay pelleting operation, farmers sell bulk hay to a central pelleting processing plant at wholesale prices and the dramatic increases in profits that come from rising oil prices will stay with the pellet plant and their investors, generally leaving the area. That would leave St. Lawrence County with no future for a local economy. It is clear from this picture that centralized pelleting operations will have a great economic incentive to move into rural areas and export local biofuel resources. They will often find government subsidies to help them. If we are to have a local hay pelleting economy then all the people with a stake in moving into the best future for St. Lawrence County will need to work together to create a prototype portable hay pelleting operation that will show the way to the next stage to a new expanding local economy.
Farmers, townspeople, the colleges and universities, the Farm Bureau, Cooperative Extension, local merchants, the County Planning Office, Economic Development Office, the St Lawrence University Burt Symposium and many others who would like to see a strong local economy in St. Lawrence County could have roles to play. An important first step would be to create a significant demand for hay pellets to show farmers there is a solid dependable market for pellets. St. Lawrence University is currently considering converting its campus heating system to burn pellets. If their new system could include the burning of hay pellets and they made the conversion soon, then that could provide the necessary demand to stimulate production.
With the potential for increased demand for locally produced hay pellets, all those who have an interest in making this transition could work together to get an in depth Feasibility Study of Portable Hay Pelleting. A Feasibility Study would need to find the best available technology for a portable pelleting system that could produce high quality hay pellets right on the farms. The ability to produce a consistent quality of hay pellets that would retain their pellet shape throughout the transportation and pellet burning process would open the way for a prototype Portable Hay Pelleting Project in the County. With much of the rural economy in New York State facing economic problems and a new focus by New York State on a $1 billion revitalization plan for upstate New York ($50 million for Agricultural development), the conditions could not be better for St. Lawrence County to look to partner with the state of New York and other agencies to take the lead in working through the stages of development to create a new local economy based on portable hay pelleting.