The Commonwealth Bank of Australia recently conducted a survey on 1,000 farms to assess the impact of energy expenses on the agricultural sector. They found that energy expenses represent over 11% of total costs for Australian farmers, exceeding 14% in the case of cotton harvesting and dairy farming. The survey covered farming operations of all sizes, with energy expenses ranging from $2,000 to $50,000 per year.
Since farms are typically found in rural locations, the power network tends to have less capacity and resilience compared with urban areas. However, the report revealed that 81% of farmers are concerned more about the cost of energy, and only 19% consider reliability to be the main issue.
Another finding in the CommBank report is the perception of energy expenses: 78% of farmers answered they have no control over energy costs, and this increases to 91% for dairy farms.
Dairy farms are especially vulnerable to high electricity expenses. Compared with other farms, they are much more dependant on cooling equipment, which consumes a large amount of power. Dairy farms are also subject to hefty capacity charges, calculated based on their peaks in electricity demand.
Although the outlook for the Australian farming sector is unfavorable in terms of electricity tariffs, the survey reveals a significant opportunity for solar power:
In addition to solar power, Australian farmers are considering measures such as rescheduling their operations away from peak demand hours, upgrading to energy efficient equipment, and installing wind turbines.
Irrigation pumps in particular represent an excellent opportunity area for solar power with energy storage. Many farms use diesel engines to run their pumps, which is neither economic nor environmentally friendly, while relying on regular diesel deliveries to the farm. Diesel savings of over 60% are possible if irrigation pumps use solar systems with energy storage.
The National Australia Bank (NAB) are another financial institution currently working with the farming sector. They offer a 0.7% discount on their normal interest rate if the loan is used for upgrades that improve the energy performance of farms. The following are some examples of improvements eligible for the benefit:
Of the $120 million originally available for loans through this program, 87% was used by small- and medium-sized farms. NAB surveyed 5,000 farmers and found that 85% consider energy expenses to be a significant business risk. This matches the findings of the CommBank study.
Solar power can be an excellent investment for farmers, since it reduces their reliance on external energy inputs while achieving monthly savings. Profit margins are normally low in the agribusiness sector, and any measures that drive down operating costs are highly beneficial.