With a bit of smart thinking, farmers could cut their power bills by $40 million a year, Adam Gifford writes.

The Energy Efficiency and Conservation Authority (EECA) has come up with a dairy farm energy efficiency tool that compares a dairy farm's electricity use to other dairy farms in New Zealand.

Its projects and relationship manager, Kirk Archibald, says the average New Zealand dairy farm spends more than $20,000 a year on electricity, but some dairy sheds are using three times as much power as others for the same milk-solids production.

A 2011 study commissioned by the EECA, the agriculture ministry, and Fonterra found the country's 12,000 dairy farms were using more than $250 million worth of electricity, or seven percent of New Zealand's total electricity use. That added about 15c to the cost of every kilogram of milk solids.

EECA believes farmers could collectively save more than $40 million a year through cost effective technologies and simple actions.

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The online efficiency tool allows farmers to map their energy use against 150 dairy farms across the country. It also suggests improvements such as heat recovery, variable speed drives and vat insulation.

Interim results from a programme run by EECA show dairy sheds have reduced electricity use by around a fifth after energy efficiency upgrades, giving a payback time of under three years.

Lincoln University agricultural engineering lecturer Dr Majeed Safa has developed a metering system for online monitoring of energy use. He says it can allow farmers to pinpoint where energy is being wasted.

"On one farm, we found that in winter, even when it was not milking, the water heating system was working and the energy cost was high. They found something wrong in the tank and decided to change it," he says.

Safa says while the sums may look big, at the individual farm level it doesn't become an issue farmers want to tackle when the milk price is relatively high.

When the price is low they want to know when they will get their investment back. "If you want to improve the system, monitoring helps farmers understand how much they have saved," he says.

While upgrading existing sheds can produce savings, Safa says the big gains can be made from the design of new sheds.

The EECA-Fonterra study found half the energy was used on water heating and pumping, 17 percent went on refrigeration and 15 percent on vacuum pumps.

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Bringing together the heating and cooling plant can save a significant amount of electricity. Farmers can also generate their own electricity from solar panels, or use solar to heat water.

"Solar panel or micro turbines can be very useful technology for dairy farms."

Read more of Element's in-depth series on sustainable agriculture

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