Electricity tariffs, changing our irrigation landscape.

Electricity prices have a significant impact on the Australian agricultural businesses. With the ever-increasing reliance on energy for farming operations, electricity costs have become a critical issue for sugar cane growers in all areas, but even more-so here in the Dry Tropics where irrigation is not supplementary, but essential. Energy tariffs (that change every year on July 1st), if not managed correctly, can be at times the difference between profit and loss. Predicting these changes from one year to the next may seem impossible but with reflection on past tariffs, renewable incentives, and current pricing structures, plans can be put in place to help overcome possible future financial strain.  

Electricity Pricing Structure in Australia

• Retail Tariffs: Farmers in Australia typically face retail electricity tariffs that vary depending on the state or territory. These tariffs can be based on:

  • Flat rates where a constant rate is charged for electricity usage.

  • Time-of-use (TOU) rates where the price changes depending on the time of day, with higher rates during peak demand periods.

  • Off-Peak rates where electricity is only guaranteed for a given number of hours per day in off peak periods and the remainder is charged at a discounted rate.

  • Demand charges that focus on the highest level of electricity consumption in a given period (e.g., during irrigation seasons).

• Network Charges: These are costs related to maintaining the electricity distribution infrastructure, and they often make up a significant portion of farmers' electricity bills.

• Market Conditions: The National Electricity Market (NEM) governs electricity prices in most of Australia, with prices fluctuating based on factors such as supply and demand, fuel costs, and generation capacity.

It’s the Time-of-use (TOU) Tariffs & Off-Peak Tariffs where, as an industry we should be taking advantage of the most affordable energy prices. For those who cannot use this advantage though, the penalty is increasing - rapidly. Growers that simply must irrigate around the clock to “keep up” are now subject to Flat Rate energy bills of 40% (or more) than they had just 5 years ago.

Why?

Our peak demand period has changed significantly. Our past peak use times were morning and night 6 – 9, where, as a nation, we consumed more energy in the form of hot water and cooking. The nation-wide roll out of solar energy has largely offset this load and now, as a grid, our peak period is (or will be) from 4pm – 9pm and predominantly weekdays. The concern moving forward is the roll out of electric vehicles and high-speed charging units. If residential Australia is to adopt the push toward electric vehicles as a nation, the energy providers will need to overcome the possibility of the Australian workforce leaving work at 5pm and plugging their electric vehicles in at 6pm to be at dinner by 7pm – what else happened? The sun went down. This is going to put a massive demand on the grid! Certainly, batteries and other options will be rolled out to help alleviate this issue but in the meantime as an industry, what do we do?

• Solar Power: Due to high electricity costs, many Australian farmers are turning to solar power as an alternative to traditional electricity sources. Solar panels can reduce reliance on grid electricity for irrigation, cooling systems, and other farming operations, leading to significant savings in energy costs over time.

• Energy Efficiency Measures: In addition to solar energy, farmers are also investing in energy-efficient technologies, such as efficient irrigation systems, automation, and monitoring systems, to reduce electricity consumption. These technologies help farmers make more sustainable use of electricity and improve water efficiency.

• Energy Storage: Farmers are increasingly looking into energy storage systems, such as batteries, to store excess solar energy generated during the day, which can be used at night or during peak demand times when electricity prices are higher. For our industry, however, there is still a ways to go as it is still far too expensive.

• Tariff management: TOU tariffs certainly help, however, the shift being further encouraged by the providers for irrigation is the Off-Peak Tariff 34 (see below). At present, for growers who have already made the shift, it is a rarity that supply is lost at all and around the clock irrigation can be achieved at a 30% discount. This won’t last forever though, as a switchable load is being built for predicted future peak demand requirements. In essence, eventually growers will lose 6 hours a day, 5 days a week (20%).

 Conclusion

The issue of peak demand electricity being undeliverable is the real problem at hand. Regardless of the root cause, the electricity grid, as it stands, is simply not equipped to handle the intense usage fluctuations that the renewable direction could guide it. So, if there’s not enough electricity who is going to miss out? Non-essential users (Off peak tariffs), of course, will be first to be switched off. However, if there is no load on tariff 34 how can it assist? Over the next few years, it is clear that further financial incentives will be implemented to encourage load profiles to shift to the off-peak tariffs - not necessarily by making it cheaper but, as they have done consistently over the last decade, make the alternative unaffordable. Energy consumption between 4pm & 9pm has already exploded and it isn’t finished. As an industry we need to be ready.

The real concern for growers moving forward is predominantly for those who are already struggling to keep up with finance, resource and climate conditions - as today’s conditions are the best they are ever going to be. Electricity prices will increase. Access to electricity in peak times will be limited (by price or conditions of use). Irrigation cost efficiencies will get harder .

How do growers prepare?

First and foremost, by assessing pumping infrastructure. If a minimum of 20% of the irrigation week is removed and irrigation is already 24/7, clearly to future proof your business 20% more water is required at any one time. Improvements in pumping efficiency and infrastructure coupled with systematic maintenance may be all that is required. Recent irrigation trials conducted throughout the region also show that higher inflow rates have other added irrigation efficiencies also. Full irrigation system efficiency assessments are paramount in aiding your business’s future financial security.

Secondly, automated assistance. If 20% of the irrigation week is lost by time constraints and human resource shortages, recent advances in automation could be an option that wasn’t available or financially justifiable in the past.

Thirdly – Solar. If you have an 18.5KW or larger pump without an array on it, why? Generally speaking and without ulterior motive, there’s not a better ROI than the current pricing of an installed system. Also, when the shift from funding generation (solar panels - STC’s) transitions to storage (batteries), business’s that haven’t already taken advantage and installed an array will be left behind.

In essence, any investment in increasing irrigation efficiency to overcome not only the cost of electricity but the loss of 20% of the working week, is a good one.

Written by

Chris Doblo - Irrigation Specialist, Farmacist Pty Ltd

Email: cdoblo@farmacist.com.au   Mob: 0438331527