14.06.2024 | Innovative partnerships in France

Growing business: how Axpo is helping French greenhouse farmers

In France’s agricultural sector, vegetable farmers manage an extensive 1,130 hectares of greenhouse space, approximately six times the size of Monaco. But the farmers face significant challenges from high energy costs which hamper the competitive production of vegetable crops - mainly tomatoes and cucumbers in heated greenhouses.

Dependent on government support, greenhouse farmers in France have struggled to maintain profitability and plan their future activities. As French subsidies are gradually set to be phased out by 2030, Axpo has stepped in to offer long term fixed-price energy contracts that secure the farmers’ future by hedging against volatile markets.

The Energy Challenge in Greenhouse Farming

Running a greenhouse is an expensive endeavour, requiring around 400 kilowatt-hours (kWh) of heat for each cubic meter. This heat is produced primarily by natural gas that runs boilers or combined heat and power systems (CHP). From the 2010s, the French government has been encouraging tomato and cucumber farmers to implement CHP technology in their greenhouses by offering subsidies. 

Cogeneration heating technology in greenhouse farming 
© INNIO Group’s Jenbacher technology 2024

Also known as cogeneration, CHP allows the simultaneous production of electricity and heat. Compared to the separate production of electricity by a gas power plant and heat by a gas boiler, cogeneration can save up to 20% in fuel consumption. For French vegetable farmers, this heat can be used to warm their greenhouses, ensuring optimal growing conditions. Additionally, the carbon dioxide (CO2) produced during electricity generation can be captured through catalysts from exhaust gases and harnessed to promote plant growth. This makes cogeneration a particularly valuable technology for energy-intensive industries like greenhouse farming.

Subsidy loss exposes farmers to high energy prices

Historically, the French government introduced subsidies for cogeneration technology to provide the country with reliable power production in winter, while supporting the heat-consuming sectors. This incentive was so significant – reducing those costs by a factor of three – that today 70 per cent of greenhouses in France benefit from heat produced by cogeneration. However, these subsidies will be phased out entirely by 2030. This will leave farmers vulnerable to fluctuating gas prices, as seen during the 2021/2022 energy crisis. Farmers will be exposed to market forces and possibly higher heating costs.

Since 2020, natural gas prices, ranging from €30 to €150 per megawatt-hour, have significantly impacted production costs, causing them to vary from as low as €0.7 to as high as €3.5 per kilogram. With a wholesale price for grape tomatoes at around €3 per kilogram, such volatility in production costs puts French greenhouse farmers at risk, making it increasingly difficult for them to produce tomatoes cost-effectively.

The Axpo difference

Long recognised for its risk management expertise, the Axpo team in France has helped several greenhouse farming cooperatives protect themselves against unpredictable changes in energy prices. Offering an innovative way to secure price stability for both the gas they consume and the electricity they produce, Axpo’s hedging strategy enables farmers to lock in fixed energy prices for periods ranging from 5 to 10 years. This allows producers to more effectively control their expenses and revenues, mitigating the risk of sudden spikes in energy costs. Additionally, Axpo’s approach encourages the development of cost-effective energy solutions, paving the way for new revenue opportunities.

Long-term hedging, strong partnerships

Axpo has formed strategic partnerships with local cooperatives, industry partners like construction group Eiffage, and banks to help facilitate long-term hedging strategies for clients.

Eiffage Energie Systemes Cogeneration Managing Director Gilles Marguerat said: “Of all the energy companies we met, Axpo was the only one that took the time to understand the issues and work with us to find long-term solutions that best enhance the advantages of CHP for France’s greenhouse farmers."

Anne-Claire Goyer from Le Potager de Jade (30ha) explained the benefits of this approach: "Partnering with Axpo has transformed our operations. Thanks to fixed energy prices, we can plan our production without the fear of volatility, while ensuring competitive heat production costs."

@ Émeline Boileau, YDEAL.

Up to 2023, Axpo had established 70 business partnerships with various cooperatives in France. Representing more than 30 greenhouse farmers who have signed energy contracts with Axpo for up to ten years. This involvement of cooperatives means that more farmers can benefit from Axpo's long-term fixed prices. This approach gives them energy cost stability and predictability, enabling the farmers to better manage their production expenses while ensuring a reliable energy supply.

Looking to the future

Stable, long-term pricing contracts also allow greenhouse farmers to confidently invest, or reinvest, in their CHP facilities. Such investments are crucial, not only to upgrade existing systems and boost efficiency but also to build new facilities which will sustain future operations. Keeping heating costs below those of traditional gas boilers also enhances the sector’s efficiency and competitiveness.

Through its strategic energy management and market optimisation services, Axpo collaborates closely with greenhouse operators to enhance the efficiency of their heat production mix. Once a long-term price hedge has been secured for the client, Axpo manages on a weekly basis the so-called “spark spread”: the difference between the cost of natural gas and the revenue from the electricity generated. Knowing market prices, heat demand and CO2 needs, this expert strategic analysis helps farmers optimise the operation of their CHP plants by identifying which heating method is the most cost efficient,

Towards tomorrow’s agri-energy solutions

Axpo's strategic focus on risk management and hedging is transforming agricultural energy management for French greenhouse farmers. In securing stable energy prices, Axpo is softening the economic impact of the gradual phase-out of subsidies and promoting greater long-term financial stability and independence. Looking ahead, Axpo is well positioned to further extend its international know-how in innovative technologies like hydrogen and biogas to customers in France. The team will continue to work with greenhouse farmers, seeking solutions that seamlessly integrate new energy sources, with the aim of ultimately replacing natural gas in future. This collaborative and far-sighted approach promises to bolster economic stability and secure environmental sustainability in the agricultural sector. An ambitious yet necessary goal, shared by operators, policy makers, and energy professionals.

Tanguy Limpens and Adriana Nyamleu from Axpo France

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