Electric water heaters for mushroom producers.

Mushroom producers must constantly re-evaluate their energy strategies to ensure that they are using energy in an optimal manner to increase profitability. The importance of developing and implementing energy management strategies is magnified by: 1) dramatic increases in price of energy, 2) uncertainty of the long-term availability of conventional fossil-based energy sources, 3) expected dramatic increases in price of electricity in Pennsylvania after the rate caps expire in 2009-10, and 4) prospect of restrictions of carbon emissions in the near future.

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The objective of an Energy Management Strategy must be to "increase profitability and net cash flow of agricultural operations by optimizing the use of electricity and other forms of energy."

When considering various alternatives for heating fuels, a mushroom producer needs to be able to make an "apples-to-apples" comparison of various energy sources to know which source is more economical. For example, which is cheaper--natural gas at $1.40 per therm ($14.00 per dekatherm) or #2 fuel oil at $2.40 per gallon? The only way valid comparisons can be made is on the basis of cost per million BTU. To make such energy comparisons, go to the web site http://energy.cas.psu.edu to download the Energy Cost Calculator. At the Web site, click on the first link to "Energy Cost Calculator." At the bottom of the screen that appears, you can download an Excel spreadsheet that calculates dollars per million BTU in Column I for the various energy sources with the prices that you insert in column E. (You can also download a spreadsheet with SI units that calculate dollars per GJ for each energy source.) The graphical version of the calculations appears on the second page of the Excel workbook. Be careful when inserting the energy prices in Column E to use the same units. Refer to the notes at the bottom of the table. It is only when you compare different forms of energy on the basis of dollars per million BTUs that you can make true "apples-to-apples" comparisons.

For the example of natural gas vs. fuel oil, the cost for natural gas at $1.40 per therm is $16.47 per million BTU whereas the cost for the fuel oil at $2.40 per gallon is $21.52 per million BTU. Therefore, natural gas at $1.40 per therm is a cheaper energy source than fuel oil at $2.40 per gallon, with the savings amounting to $5.05 per million BTU.

Today, the price of electricity in the 2007-approved tariff of Philadelphia Electric Company (PECO) is prohibitively expensive to be considered for use as a heating source in commercial mushroom production facilities. This statement is probably true for most electric utility company rates in the United States. The price of electricity is about $0.0932 per kWh (or $27.32 per million BTU) for a typical mushroom producer operating with a 60 percent load factor in PECO territory on the High Tension (HT) tariff. The equivalent price of a gallon of fuel oil to provide the same amount of heat as electricity at $0.0932 per kWh is $3.05 per gallon; the equivalent price for natural gas is $2.32 per therm ($23.20 per dekatherm); the equivalent price for propane is $2.13 per gallon. So, the logical conclusion is that since the prevailing prices of the fossil fuels are less than the calculated equivalent prices for these fuels, it makes absolutely no sense to even consider using electricity for heating water at a mushroom production facility.

But wait one minute! Electric utility companies often offer riders or exceptions to their customers who can shift a significant share of their electricity usage to time periods when the total demand for electricity at the utility level is relatively low. Mushroom producers should explore all riders available to them. One of the riders offered by PECO to its commercial and industrial customers is the Night Service Rider. The monthly fee for this rider is $11.39 on the HT tariff and $9.11 on the General Service (GS) tariff. A very significant benefit of the Night Service Rider is that the demand charge for any given billing period will be based on the peak demand occurring only during the "on-peak" period, which is defined as 8 a.m. to 8 p.m. Mondays through Thursdays, and 8 a.m. through 4 p.m. on Fridays. All other times of the week, including holidays, are considered "off-peak" and the electricity used during off-peak hours will not influence the peak demand that is used for billing purposes. This rider provides financial incentives to shift the more energy-intensive operations to the off-peak period and to schedule any on-site generation equipment to "rest" during the off-peak period.

Electricity prices per kWh for the scenarios of whether the extra electricity consumption for heating water contributes to peak demand are presented in Tables 1 and 2 for the HT and GS tariffs, respectively. The equivalent prices of #2 heating oil ($ per gallon), natural gas ($ per therm) and propane ($ per gallon) to provide energy at the same price as the electricity for each scenario are also shown in the tables.

The price of electricity is prohibitively expensive for heating water whenever the extra electricity consumption for water heating contributes to the peak demand during the on-peak period (56 hours per week) on both the HT and GS tariffs. Heating oil, natural gas, and propane are all cheaper alternatives at prevailing prices than electricity usage that contributes to peak demand. But today electricity in PECO territory on the HT tariff is the cheapest source of energy whenever the extra consumption does not contribute to peak demand. On the GS tariff, the benefits of using electricity for water heating are not as significant. In fact, electricity for water heating cannot be recommended for those GS customers who have the dual meter system (CH8-9) when considering that virtually all the electricity consumed during the eight winter months would be at the price of $0.0719 per kWh. The dual meter system is recommended for mushroom producers but not for water heating.

A mushroom producer should not plan to use electricity as the sole energy source for heating water, but should seriously consider installing one or several electric water heaters to be used during off-peak periods, with a conventional fossil fuel used during the on-peak periods. (Technically, it would be feasible for a mushroom producer to use electricity for water heating during the on-peak periods as well, provided that the extra consumption does not result in setting the peak monthly demand during the on-peak period. But it would be very difficult to manage such a strategy; therefore, the recommendation is to use electricity for water heating only during off-peak hours.)

Since the prices for various energy sources are so dynamic in nature, it is obviously impossible to know what source of energy will be the cheapest, let's say, three years from now. Therefore, all mushroom producers are encouraged to establish dual-fuel capability--or better yet, triple-fuel capability. For example, rather than relying solely on #2 fuel oil as the source of energy for heating purposes, consider expanding equipment capabilities to use, for example, natural gas and electricity as well. As the relative prices of the energy sources change over the years ahead, then there is always the capability of utilizing the cheaper energy source at any particular time.

RECOMMENDATIONS

Utilize electricity for heating water only during off-peak periods for those PECO customers on the HT tariff with night service rider.

Connect the electric water heater(s) in series in front of the conventional oil or gas water heater for the simplest, most cost-effective method to use electricity for water heating. Then the oil or gas heater should be used during on-peak periods and whenever any final water heating is necessary.

Install and carefully monitor a programmable time clock to ensure that the electric water heater(s) is used only during off-peak periods. (A timing device may already be included in the instrumentation control package of the electric water heater purchased.) Be sure to adjust the settings after a power outage and whenever the time changes from standard time to daylight savings time (and reverse).

Discuss plans for heating water with electricity with a PECO service representative to ascertain eligibility for Night Service Rider and any other electricity service requirements before proceeding with purchase of electric water heaters.

Expenses for energy must be assessed as a proportion of the total costs of production or as a proportion of the cost of services provided. A mushroom producer should view the cost of energy in terms of x cents per pound of mushrooms produced or as a percentage of the total expenses for producing mushrooms. Proper focus on energy expenses can be assessed only when the energy expenses are viewed relative to many other expenses such as labor, materials, maintenance and insurance. It is critically important to develop and implement energy strategies for the near-term and long-term future to sustain and enhance profitability of mushroom operations.

Dennis E. Buffington Professor

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Depl. of Agricultural & Biological Engineering

Penn State University 208 Agricultural Eng. Bld. University Park, PA 19802 Table 1: Marginal cost of electricity for water heating based on 2007 PECO HT tariff with night service rider

Equivalent Costs

Cost per Cost per #2 Fuel