The Dairy Sector Can Expect Higher Energy Prices
1st Jan 18
Cameron Quin

What Dairy Farmers don’t know about their network tariffs.

Most businesses will focus on the kWh energy prices on their energy bill when they are paying for electricity. The kWh price is great if they are comparing the different offers they are receiving from the various electricity retailers. To get a better understanding of exactly how their bill is made up, other factors like, the total energy consumed over an entire year from the grid, needs to be taken into account. The amount of electricity you use determines which tariff your business is on and a tariff change can significantly increase the total energy cost per year for dairy farmers.

The majority of farmers who operate in NSW will either be on the Essential Energy or Endevour network. Both Essential and Endevour Energy have what is called a, capacity charge threshold, which at the moment is 160,000kWh per year. Basically what that means is that if in a continuous 12 month period, if your total single meter usage exceeds the 160,000kWh, either company can switch you to a new tariff which will include a capacity charge, and a network access charge at a significantly higher bracket. Just this year alone, Essential Energy wrote to over 1000 customers advising them that they were going to be moved to a higher tariff before July 2017. (1)

The easiest way to check which network you are on is by having a look at the emergency fault telephone number on your utility bill. If is it 132 080, you are with Essential Energy, if your electricity is supplied by Endevour Energy, the fault number will be 131 003.

How exactly does the capacity charge work for Dairy farms energy prices?

The electricity supplier calculates the capacity charge by recording when the most amount of energy is consumed within a 30 minute period. For Dairy farmers that would be twice daily, once at dawn and once at dusk, when milking. This graph shows when the capacity charge is set during the day.

 

If we use this example for a farm using 160,000kWh that are not on a capacity charge, their annual electricity bill, if they have a 23.4c/kWh after discount rate, will be $38,039. If Essential Energy moves the farm to a capacity charge tariff, their average cost of power would work out to be $8,464 cheaper per annum, however the shoulder, peak, off-peak and shoulder capacity charge would end up costing $13,044 more, giving a net increase of $4,580.

What are the solutions to stop this from happening? Annual grid consumption needs to be brought down below 160,000kWh and there are two ways of doing this. One is the implementation of more energy efficient machinery or adding some kind of alternative electricity source like a solar powered system.

The main hurdle in implementing an alternate power source is the large, initial costs involved. The capital required for this type of installation would be better used for business expansion and plant operations. However, a Power Purchase Agreement (PPA), removes the need for any upfront infrastructure costs when opting to install a solar photovoltaic system and ensures electricity savings from day one. The solar power company owns and maintains the system, while the dairy farm owner only pays what the system generates based on a kWh price which is lower than the cost of the grid provider. Solar Bay specialises in providing dairy farms with Power Purchase Agreements, you can view there website here, www.solarbay.com.au or contact them directly by phoning them at 1300 452 285.
1) https://www.essentialenergy.com.au/content/tariff-change

1st Jan 18
Cameron Quin

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