 Good morning folks. I'm Dennis Brothers from Robert University and let's talk a little bit this morning about solar and poultry farming. Solar for commercial poultry. A lot of talk has been going around about solar. It's becoming more and more prevalent, more and more popular across all industries. Commercial poultry is certainly one industry that can take advantage of some of the benefits. So let's talk a little bit about solar. Interesting quote from a national renewable energy laboratory that more energy from the sun falls on the earth in one hour and is used by everyone in the world in one year. So that tells us that there's a lot of energy out there that we can capture. So just a question of how do we capture it? And more importantly, how does its capture figure into the business model of commercial poultry? So we're going to talk about that today. Here's a couple of pictures from a typical poultry operation with solar installed. So you have inverters and switches and meters. And over here on the chicken house we have panels mounted on the chicken house. We'll talk about that in a minute. But basically, as far as the business model is concerned, you have two basic opportunities with using solar. You have what we call net energy metering. And these net energy metering programs vary by state and vary by utility within a state. And these are all contracted terms and have limited controls on what you can use and how much you get paid. And then there's also what we call behind the meter or net billing. This is a different type of business model. And these can be limited as well. We'll go into detail about what these are here shortly. But just some basic information first about solar for poultry and about solar energy in general. This is solid proven technology. It's been around since the 1950s. And panels are proven to last a long time. The actual panels themselves that capture the sun's energy and convert it into electricity. They are proven to last a long time. In matter of fact, all the pounds you purchased today are typically warranted for 25 years and actually 30 years is becoming the norm. And they've been proven to last longer than that. They don't just quit after 30 years. There are panels out there that have been tested that have been in the field for over 50 years and are still producing electricity. But the warranty guarantees that these panels will produce at least 80% of their new production capability out to that 25 year term. So that's you have a guarantee production on these panels. And then the inverters that convert the panel energy, which is DC or direct current, it converts it to AC or alternating current, which is the type of power we use in most all of our poultry housing operations. These inverters are are warranted typically for 10 years. Some are for 15 years. You can buy longer warranted if you want, but typically that's not necessary because after, you know, they'll last longer than that warranty and typically even if they don't to purchase a new one is going to be less expensive. Over time, when you look at the time usage, then buying a longer warranty and as time goes on, inverters are going to improve more efficient, so forth, so on. So you just as good to take a standard warranty and replace the inverters after 10, 15 years. Low minus requirements like solar system, particularly a net metering type solar system. There's no moving parts, well, or very few, you can get some pounds that have some of the parts we'll talk about in a minute. But they're very much they're modular sturdy, you have damage to a piece of a pound you can replace one section hundred place the whole system. The systems are very safe as long as they're installed properly by reputable solar installer. They're very safe. They operate just in silent the background once you install the system, you will never know it's there. It does this thing and doesn't cause any problems. There are many mounting options. We try to use what was otherwise be unusable space. Sometimes that is on the roof of the chicken house. There's a lot of land up there, you might say places to mount panels and that's a consideration. But also you can mount them on the ground on racks on the ground. That's also a good option. I'll talk about the various pluses and minuses of that. Some of the negatives perhaps is that the initial cash cost to put in a system can be high. A typical poultry farmer is going to put anywhere between 50 and 120, 150 kilowatts of solar and typically they get that installed at today's prices. You're looking at somewhere between $1.75 to $2.00 a watt. So at those numbers, if I put in a 50 kilowatt system, which is 50,000 watts, $1.75, I'm looking at $87,500 for that system. So it's a long-term payback. Typically the systems according to how the metering operation is can payback between 10 and 15 years, sometimes less, sometimes longer. But the payback is very dependent on many things. That's part of the trickiness or the tricky part about trying to install a solar system. You've got to look at incentives you can get. Are the government incentives that you can get to help lower that cost? What are the electricity rates that you're dealing with? A very simple thought is if you're paying a lot for electricity, then you can generate that electricity. If you can generate it cheaper than you're paying for, then it makes really good sense. Or if you can generate it close to the price you're paying for, it can make really good sense. But if you're already purchasing real low-cost energy from the utility company, then it makes paying for a solar system much more difficult. What kind of meeting agreements? Which all plays into that buy-sell equation. And then are there size limitations? Some utility companies put size limitations on the system that you can put in to get into certain agreements. So all those play into the payback of a system. Talking about incentives, right now there are two main incentives to consider. One is the federal income tax credit, where the federal government is offering a deduction against income tax based on the cost of a solar system. Right now that rate is 26% of the initial purchase costs can be deducted from income taxes owed. So what's the problem there is if you don't owe any income tax, then you may not be able to take advantage of this credit, at least not immediately. One good thing about these credits right now is the law stands as they are bankable up for a period of time. So if you don't owe tax this year and you expect you may owe taxes five years from now or 10 years from now, then you may be able to reach back and get this credit at that time. So you may not lose it completely, but you may not get to take advantage of it up front. That may change with the new bill back better law or bill that's up for debate. If that gets passed, there are some indications that that could change you on forward. So it's something that you can keep your mind, keep your mind at looking at in going forward in the future. Cost share programs are available, but they're limited. The one most applicable to a public shoulder situation is the re grant the rule energy for America program. And that is a 25% cost share it's reimbursement so you have to spend the money first and then hopefully get the grant. It's competitive. And it is limited. You have to, you have to apply for the grant. If the funding runs out before your time comes up, then you won't get the grant, but you've already spent the money so that's something to consider. Most poultry farms have a really good chance of qualifying for this grant. It takes an effort to make the application we recommend you contact a professional service provider that understands grant writing to help you write these. Have you with these grants. There's also a loan option where you where you get a low interest loan. It's also available. Then the meeting agreement. This is the biggie. This is the thing that really makes or breaks most solar for poultry opportunities. Primarily, this is governed by this state and you need to find out if your state has a net energy metering policy and what that policy is those are set by the public service commissions usually or the legislature. They can change. They can change over time. So you need to be aware of what that policy is. Does that policy require utility companies to pay for your excess solar you put on the grid and how much are they required to pay for it. And those net net energy metering laws address those things some states not have net intermediate net energy metering laws at all. And if they don't have that law and it's up to the each individual utility company to decide what they will do. After if we have behind the meter or net billing in your state without a net net energy metering law, then what the utility companies can do is can be a broad spectrum of possibilities from nothing to fairly good deals. You just have to know what those are. What does net energy metering mean? Let's go over this definition as we go forward. I typically don't like to put big definitions on PowerPoints, but this is a good one or electric customers who generate their own electricity. That's what we're doing. If we're putting in a solar system, we're generating electricity. Net metering allows for the flow electricity both to and from the customer typically through a bidirectional meter. And when the customer is generation, the power you're producing in the solar system is more than your use. Then that electricity flows from the customer back to the grid and it offsets electricity that was consumed by the customer at different times during the building cycle. So what that means is if I'm producing electricity during the day and I'm not using all of it, it goes back to the grid. And under net energy metering, that electricity is calculated, is kept up with. There's a meter that meters that. And then say that night, I'm using a bunch of electricity that I'm pulling back from the grid and I wouldn't be paying for. At the end of a set time, those two numbers are reconciled and I get to apply my produced energy that I didn't use to the energy that I purchased and it offsets it. So that's net energy metering. The customer uses excess generation to offset electricity that your customer otherwise have to purchase at full retail. And it says here net metering is required by law in most US states. Well, maybe that there are a lot of states have a net metering law of some sort, but that law is highly variable. Some states do not have net energy metering at all. Talk about behind the meter or net billing. And billing is what you get when there is no net energy metering law designated otherwise. They can mean different things to different utility customers. Each utility typically has their own distributed distributed energy generation programs, what they typically call them. If they don't have to operate under a net metering law. And sometimes local loan coops even have more finer details of what they can or they will and won't do. So what does net billing mean? Well, your power generation offsets power purchased from the utility company if you are able to use it. So if I'm generating power and I'm using it, that means I don't have to buy that power from the utility company. I get that benefit. And then utility company pays you for excess because there is a federal law that requires them to pay you something for your excess. The key is how much and how do they reconcile it? Under net billing, you don't get to bank any excess. You don't get to hold it and apply it later. And when they true up or how they how they calculate the difference in excess and used is very important where they do hourly or monthly or annually makes a big difference. Most of the net billings are going to do it hourly or instantaneously and that tends to play towards their side and not yours. And then what they pay you for the excess when you're not using is typically what they call an avoided cost. It's roughly a wholesale rate. It's often less than a wholesale rate, but that's a rough way to think about it. It's less than a retail and overlooking at avoided costs for cost rates across many utility companies, we see that that is usually somewhere in the 20 to 30% of the retail price. For example, the Alabama Park Company, the avoided cost rate currently they posted at 2.4 cents per kilowatt hour. The average cost of electricity retail in Alabama is about 11 cents. So you see the difference there once you pay for versus what they will pay you for your excess. Why does that make a difference? This graph here and we see on our red line, this red line represents the actual power usage of a poultry house throughout a year. So what are you seeing? We see a flock of chickens, we sell. See a flock of chickens, we sell. See a flock of chickens, we sell. You get that cycle because we're not using power consistently in the chicken house. It varies with the flock age and with the flock cycle. Our little purple, yellow and blue bars here represent solar generation of three different sizes of solar systems. So what do we see? You see there are areas where we're generating power and we're not using it because we're using down here, but we're generating up here. So all this is excess. This would be going back to the grid and you would be getting paid something for it. It could be low avoided cost. It could be retail if it's net metering. And then places where I have usage that is above my generation, what's happening? Well, I'm getting retail value for this generation because I'm using it and not having to buy this much from the power company. But all this up here, I'm having to buy from the power company. Now, let's look a little closer at a different graph that maybe make us see a little bit better. Our blue line is our load line. We just took a 60 day period from the previous graph and blow it up so you can see it. What do you see? We see we got generation and then night time comes and there's no generation. Next morning, we got generation. Next night, no generation. So that's the intermittency of solar energy. So everything, all the generation that is under a blue line, we're getting the benefit of retail value because we're not having to buy that from the utility company. So everywhere we have above it, that's going back to the grid. So like in this 60 day period, we see we've got as much or more power in these two systems that are going to going back to the grid. But you see the two systems vary. I got a smaller system. I have more area above my generation and less above my usage. Whereas the larger system, I've got a lot more above my usage. But keep in mind, I had to pay for that larger system. So that's where we have to look at where the sweet spot that we actually make money with a system. So in this graph, all generation above load, which is up here. If I'm in a net billing situation, I'm only going to get paid some small amount, some amount less than retail generation. That's below my usage. I get the value of retail because I'm not buying that from utility company. It's it's it's I'm generating it myself. So the cost of that is broken down from the cost of the system. And then, of course, any load that I have above generation like right here, we have a little bit that's above our generation. I had to buy that at retail. In this case, I'd use 11 cents, for example. So we see we're having to balance these two things. Now, let's look at net energy, net energy metering versus net billing. Here's another 30 day cycle. For instance, this is just one month of generation over under usage. What do we see? We got some periods where we had we had generation above our usage toward our system size. It could vary. And we have areas where we had usage above our generation in the same month. So what does that mean? Well, if I'm in a net billing situation, then every day or every hour, that difference is reconciled on an hourly basis. And I don't get to bank it. So all of this extra in these green bars and a little bit in these large bars, where it was reconciled and paid for that day. I didn't get to apply this over here, this big empty spot. Now, if I'm in net metering, particularly if I'm in a monthly or an annual reconciliation period, let's just use monthly. The power company adds up all of these, this extra green line. It adds up all this empty space and it reconciles those two. So in net metering, I get to apply this extra to pay for this over here at some but better than wholesale rate, usually one to one. The same as I would pay for it retail. So that makes that monthly bill look a lot different if I'm in net metering, net energy metering versus net billing. So knowing what's going on with your utility company is very important. The utility company pays you for excess in net billing, but it doesn't pay you retail necessarily. Often it's going to pay you that wholesale rate. And it's all based on how they, how they reconcile most of the net, that billing will be hourly. And often utility companies will limit a system size. Let's go back. What if they limit you to 60 kilowatts on your farm? Well, that changes the story. Then if they allow you to put a larger system. So the size of the system allowed in, in that billing is important. But also if I'm in that billing, I may not want to put a larger system. Why? Because if I produce way, way too much of this cheap, cheap solar that I'm giving back to the power company at a low rate, but I'm having to pay for the larger system that produces this, that relationship between how much it costs me to produce it versus how much I'm getting paid for it could not be in my favor. So in this case, it may be more profitable to have a smaller system in a net billing situation because the majority of the power that it is producing, I'm getting the benefit of getting full retail for it because it falls under my usage line. Also, some states or some utility companies may charge you a fee to install solar on your farm. And this can be very, very negative against solar system. If they charge you a fee, for instance, when you tell the company charges $5.41 per install kilowatt per month, that means if I put that smaller 50 kilowatt system, I'm going to pay them a $270.50 fee per month just to have the system on their grid, whether it produces power or not. That fee can make a solar system unfeasible. Let's talk a little bit about tax incentives and cost share. We talked about this a little bit earlier, 26% of a total install cost against incomes, taxes owed. It is one year retroactive and up to 20 years affordable. That could change. That could change with the new federal laws if they go into effect. Of course, the REAP program will talk about that. We'll reimburse with 25% cost share. It's competitive. You need to seek a technical service provider. You can get online, look up REAP grant. You can get on the USDA site. They can direct you to some of those technical service providers. So let's look at some economics. Let's look at some numbers. If we take a farm of the current southeastern model in southeastern broader belt and say a 54 by 500 house and we use that demand model we have. We have that first real colorful graph, that big red line. If we use that data as our farm demand and we say we're going to buy a system, let's say we're going to get a real well priced system at $1.50 install and we're going to put in 50 kilowatts. We'll consider our local utility. I'm going to use Alabama. That's where I'm at. And we use their large ag rates, right? A 15 year loan at 5% interest. And I'm going to look at the 25 year net present value evaluation. What that means very simply is I'm looking at in 25 years will this investment pay me more than investing it in something else and they set this count in interest rate. So basically if a 25 year net present value is positive if we consider time value of money, inflation, inflation of cost escalation, interest rates, all those things put together, if my net present value is positive, it means that investment is positive versus putting that money into something else. And we use a net billing example. And then we'll talk about the differences in a net metering and net billing example, the differences in NPV. And then we're going to look at whether without a solar fee. And I'll use 541. I've seen $3, $4 or the different fees. So we'll look at whether or without a fee and whether without incentives. So let's go down the line here. Worst case scenario of that for that farm, if I'm in net billing, I get no incentives and I have to pay the solar fee. As you can see, that's a losing situation. Losing situation. Don't spend your money there. Well, what if I'm in the same net billing, but I can get a REIT grant and I can use income tax credit, but I still have to pay the solar fee. Once again, losing situation. That's where the solar fee can make or break the solar system on a poultry farm. Once again, remember we're in that billing, so we're not getting full retail for all that excess. That makes a big difference. The two things that make the difference here is net billing and solar fee. All right. Well, if I'm in net billing, I get no incentives and no solar fee. Well, it's a little bit better, but it's still not good. You can see how these things interact, how they change the economics. Well, now finally we get some profit. Net billing is still not the best meeting situation, but I can use the tax incentives and I can get a REIT grant and there's no solar fee, but now I make some profit. You look at these two here, two and four, we see the effect of a solar fee directly. Makes a big difference. Net billing. Let's go on down there and get the rest of them on here. Go through them real quickly. What if we change the system size? Net billing, a larger system, get tax incentives and REIT grants. PUS has got to pay the solar fee. That's the worst situation in the world. Why? Well, if a small system is unprofitable in this situation, a larger system will be even more unprofitable because I've got to pay for that larger system. Well, same situation, but no solar fee. Well, now we've got a little profitability to talk about there. The solar fee makes a big difference. What if we put in a smaller system and I can't get incentives and I don't have to pay a solar fee? Well, unprofitable again. So you see that all these variations make a difference in the bottom line of the solar systems. You need to know these things. Let's look at net energy metering. The best metering opportunity. Don't have to, you know, don't get incentives. That's fine, but I have to pay up solar fee. Not good. The best situation, if I'm in net metering, that's not the best situation, but a good situation. I'm in net metering. I get incentives, but I still have to pay the fee. I make a little bit of profit. So what would you think the best profit is? Of course, it's net energy metering. I get incentives and there's no fee. Now I get to make a nice profit on my investment. So you have to know all these situations and what it means to your farm. What do you need to know then? What kind of distributed energy program does my utility company have? Is it net metering? Is it net billing? What are the rates for excess power being purchased? When do they reconcile those numbers? Is there a size limit? Is there a distributed energy fee, a solar fee? Are there other restrictions to know? That's the things you need to know before you go down the road of deciding to put solar on your farm. And then you need to know about it, incentive opportunities. Talk to your accountant. Investigate the rebrand. You're likely qualified, but there's limited funding and it's competitive. And then finally, farm specific demand profile. We, in all those examples, we used one farm demand line to compare them to. Your farm demand could be different. You have to match your farm demand to the local solar generation profiles and make the right decision specifically on system size. You have to put the right size in that is most profitable giving all of these other things. You got to put the right size in that maximizes the high-value solar that you get to receive a retail benefit for and minimizes any low-valued excess solar that you're only going to get avoided cost or lose. What that means is just because someone tells you, hey, you can put a 200 kilowatt system and you can offset all your power that may not be the best option for your farm under your current situation. A lot of times, somewhat smaller options are more profitable than the larger options. So just keep that in mind. Appreciate your time. Like I said, my name is Dennis Brothers. Auburn University. There's an email address. Feel free to send me an email. Ask me a question. I'll help you all the camp. Appreciate it. Have a good day.