Organic Valley loans dairy farmers funds for renewable energy

Agriculture sustainability improvements have long-term positive outcomes both for the planet and the farmer’s wallet, but the upstart costs can be a preventative obstacle. Some big food companies trying to address their Scope 3 emissions have started working to knock down those barriers for farmers. 

In 2018, the Land O’Lakes Sustain program, now part of Truterra, provided loans for the cooperative’s farmers to adopt sustainable methods such as water-reuse systems and manure separation technology. Last year, Danone announced a partnership with rePlant Capital that would donate up to 40 percent of its $50 million impact fund to Danone’s farming partners, with the goal of supporting the conversion to regenerative or organic farming methods. RePlant’s first loan in January 2020 went to a Kansas family farm to install moisture probes to reduce water usage.

Organic Valley, the primarily dairy organic farmer-owned co-op, is the latest to join this burgeoning trend. Organic Valley’s farmers already practice many regenerative practices such as rotational grazing. The new loan fund made in collaboration with Clean Energy Credit Union, Powering the Good, is specifically designed to help farms reduce their reliance on fossil fuels. 

“The vast majority of [our farmers] do need to secure lending to make [renewable energy] projects happen, and sometimes they’re not able to secure that lending,” said Nicole Rakobitsch, director of sustainability at Organic Valley. “Our loan fund provides equal access across the country to clean energy funding. Not every member has access to a loan for this type of technology. And not all lenders are comfortable lending for solar.”

According to Organic Valley, the fund is the first of its kind in the industry to focus solely on renewable energy and energy efficiency. The money will go to helping farmers install solar panels, LED lighting, efficient ventilation, plate coolers that cut refrigeration costs, insulation and geothermal systems such as ground-source heat pumps. 

“When farmers are looking at their monthly expenses, oftentimes there’s competing needs on a farm right for capital projects,” Rakobitsch said. “And so when a farmer has to choose between what projects to do, sometimes solar doesn’t make the list.”

Organic Valley’s loans will have longer terms and lower interest rates that will allow the monthly loan payments to match the decrease in electricity costs — so farmers won’t be adding more expenses to their monthly bills. 

The vast majority of our farmers do need to secure lending to make renewable energy projects happen.

The loans for energy efficiency projects will have an interest rate between 2.275 and 4.25 percent interest to be paid over 10 years. The renewable energy loans will have slightly longer terms and higher interest rates — between 12 and 20 years, and 4.5 to 5 percent. Rakobitsch thinks that a traditional loan from a bank would be shorter and have a higher interest rate. That would make monthly loan payments higher than the decrease farmers would see in the electricity bill, she said A bank also would require collateral from the farm. 

This isn’t the first sustainability innovation from Organic Valley. The co-op recently transitioned all of its own facilities to 100 percent renewable energy to flatten its Scope 2 emissions and is creating a fully biodiesel fleet of trucks. All Organic Valley trucks in southwest Wisconsin run on biodiesel. The company is starting to work on a Scope 3 emissions goal, and this new fund is part of that process.

Working with the University of Wisconsin-Madison to do a life-cycle assessment on its member dairy farms, Organic Valley found that by switching to solar and other energy efficiencies, the company could reduce the carbon footprint of an individual farm (from soil to farm gate) by between 5 and 15 percent.

The loan fund has enough money to fund 15 projects, and any Organic Valley farmers across the United States can apply. Organic Valley’s farmers are mostly in Wisconsin and other Great Lakes regions, California and the North East. With 1,800 farmers in the co-op, that is a small fraction of the projects that would need to be funded to create a real difference. But Organic Valley hopes this is just the start. If there is high farmer demand, it plans to expand the program.