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Energy Efficiency Means Profitability

by John Aguirre, Guest Comment
Capital Press, August 22, 2008

I moved to Oregon in November 1999 and remember distinctly the West Coast energy crisis: rolling blackouts in California and the price instability and spikes lasting from May 2000 to September 2001 that affected several states. That crisis was caused by marketplace distortions, inadequate infrastructure, and made worse by drought conditions in the Pacific Northwest.

Today, agriculture faces a different, but genuine, energy crisis. The rapid escalation of energy costs over the past two years has seriously undermined the competitive position of Oregon nursery and greenhouse growers and worsened the industry's financial position. This is the most challenging business environment many nurseries and greenhouses have experienced in the past 15 years, and the high cost of energy, in all its forms, may prove to be the difference between profitability and failure for many nurseries and greenhouses.

Rising energy costs are felt not only within direct budget line items - natural gas and propane, electricity, and fuel - but affect nearly every aspect of the grower's operation. Production relies heavily on energy-intensive inputs such as plastic pots, plastic sheeting for greenhouses, fertilizers and crop protection chemicals. The cost of all these items has increased substantially - fertilizers alone have doubled over the past three years - and a slowing economy leaves little room for growers to pass along these higher prices to their customers. To add insult to injury, several growers have told me that higher diesel prices have forced them to harden their fences and locks, and institute other security procedures to protect their on-farm tanks from fuel theft.

Oregon agriculture is under intense pressure to reduce its labor requirement. The adoption of labor-saving technologies typically means high capital expenditures and a greater need for energy. The future is one of greater reliance on energy, not less. With the quickening pace of technology and greater mechanization, farmers will need a stable and reliable energy infrastructure to deliver natural gas and electricity.

West Coast agriculture has a unique challenge: We grow lots of crops (California citrus, Washington apples and Oregon nursery and greenhouse plants), but this country's major population centers are far away. Most of what we grow and harvest is shipped to out-of-state markets. The big population centers of the East Coast, upper Midwest and Eastern Canada are important markets for our growers. Our industry alone utilizes about 80,000 trucks a year to move our product to market.

Despite our distance, Oregon nursery growers have enjoyed a competitive advantage in these markets due to our ideal growing conditions. Oregon's climate allows growers to be more productive and grow higher quality plants than other parts of the country.

However, higher fuel costs have seriously undermined our competitive position. The U.S. Energy Information Administration estimates average diesel prices in 2008 and 2009 will be $4.18 and $4.27 per gallon, respectively, which is more than 45 percent over the 2007 average price of $2.88 per gallon. The rising cost of energy is a serious and immediate threat to the continued well-being of our industry and the need for a stable and reliable energy infrastructure has emerged as a vitally important long-term policy goal. We believe aggressive and focused outreach can make an enormous difference.

To speed the process along, we encourage policymakers to look at the Texas Agricultural Technical Assistance Program, administered by the Texas State Energy Conservation Office in partnership with other groups. This is an aggressive effort to market efficiency opportunities, educate and train growers, and to steer those growers toward resources, grants and loan opportunities to defray the expense of adopting energy-efficient practices and technologies.

We also recognize that efforts to lessen our dependence on foreign energy and reduce greenhouse gas emissions create new market opportunities. According to Architecture 2030, heating, lighting, cooling, hot water and running of pumps and systems within buildings account for 40 percent of total U.S. energy consumption and greenhouse gas emissions. The intelligent use of landscaping plant material and green roofs can have a tremendously positive impact on this consumption level, as they benefit in shading buildings, blocking cold winds and reducing temperatures in urban environments.

The future of Oregon's nursery and greenhouse industry, like all sectors of agriculture, will require a reliable and stable energy infrastructure that can serve a growing Pacific Northwest population base and economy, at economical rates. Without that, Oregon's nursery and greenhouse industry cannot continue to grow and prosper.

John Aguirre is the executive director of the Oregon Association of Nurseries
Energy Efficiency Means Profitability
Capital Press, August 22, 2008

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