Wind turbine revenues do not increase investment in farms
A new study conducted in part by Kansas State University finds that farmers are not making more investments based on the energy income they get from their land.
They also don’t seem to be doing less.
“There are definitely instances where energy income makes a difference for a particular farm,” said Jenny Iff, agricultural policy specialist at K-State Research and Extension who co-authored the study. “But it’s not something you see on average.”
The study examined data from nearly 30,000 farms across the country from the United States Department of Agriculture’s 2014 Land Tenure, Ownership and Transition (TOTAL) Survey, the most recent year for which data were available.
“The fact that they don’t find a negative effect overall, I think is very important,” said Richard Thakor, assistant professor of finance at the University of Minnesota, Carlson School of Management who does did not participate in the study.
“This [negative effect] has been something that has been speculated by many commentators and also lawmakers that… these types of payments are actually bad for agriculture. “
Kansas Energy Income and Investment
Renewable energy is the largest source of energy for generating electricity in Kansas, with wind power accounting for the bulk. Wind power accounts for 43% of Kansas’ net electricity production, the second highest percentage in the country.
Kansas landowners, including farmers and ranchers, have benefited from the state’s investments in clean energy, with such projects bringing them nearly $ 40 million in additional income in 2020, according to data compiled by American Clean Power.
Since previous research has found that energy incomes tend to be stable, the researchers thought that farmers could use some of this extra income to invest in their farms.
“I thought it could be a big source of income that people use. We ended up not finding any relationship, ”said Ifft. “We measured investments in different ways, we measured energy in different ways, we tried to be as robust, as careful as possible. We haven’t seen any consistent relationship.
The lack of relationship may have been caused by the amount of money farmers made from energy income. In the study, the average farmer earned $ 6,000 per year. By comparison, a single turbine can make $ 3,000 to $ 7,000 a year for a Kansas landowner, according to the USA Today report.
“A larger sum of money can allow [farmers] making bigger purchases, like buying more land, ”Thakor said,“ It’s just infeasible with smaller payments.
In addition, farmers and landowners who earn energy income might need it for reasons other than investment.
“They may need money for their household, they may need it for family expenses. The money can be used for other purposes that could be important, ”Ifft said.
The local community and the availability of credit can also affect a farm’s decision to invest the energy income.
“If a farm already has good access to credit, if you’re a farm in this kind of situation, that extra income might not be as big as an investment in the farm,” Ifft said. “If you can’t get all the credit [you] want, the additional income is potentially very important.
No relationship to investing may not be the whole story
While the researchers found no effect on investing in data, the years ahead may tell a different story.
“It would be really interesting to see, you know, maybe there will be an effect next year, or in the years to come, the following years and you might find another kind of effect,” said Thakor. “If we looked at the same thing during the pandemic, [it] might actually have a pretty big effect.
Just because the researchers didn’t find that energy income increases agricultural investment does not mean that energy income does not have an effect on the local economy.
“Overall, there is a lot of evidence that energy income, on average, increases jobs, increases local income,” said Ifft. “But you have to be careful not to say it’s going to save agriculture or something like that. It’s not really backed up by the data.