Ag sector borrows more to avoid power price pain

Energy efficiency spending leaps as farms short-circuit power costs


Commonwealth Bank of Australia’s NSW regional and agribusiness banking general Margot Faraci talks electricity efficiency ideas with Namoi Sustainable Energy principal, Will Lulhan, Tamworth at the recent AgQuip field days.

Commonwealth Bank of Australia’s NSW regional and agribusiness banking general Margot Faraci talks electricity efficiency ideas with Namoi Sustainable Energy principal, Will Lulhan, Tamworth at the recent AgQuip field days.

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Cheap finance deals for energy efficient equipment are in hot demand

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Farmers are cashing in on historically low interest rates to fight record breaking power price rises by investing in their own energy saving projects.

Their motivation has surged amid almost daily public speculation about likely power shortages this summer and more price hikes on top of increases of almost 20 per cent in some regional areas since July 1.

Solar generation and hot water installations, new-age lithium batteries, electrical equipment upgrades and more efficient pumps, coolrooms and heating systems are all on primary producer shopping lists.

Commonwealth Bank of Australia (CBA) recorded a 400 per cent jump in business loans specifically for energy efficient equipment in the first six months of this year.

Cheap finance deals

The funds were made available via a partnership with the Clean Energy Finance Corporation (CEFC) at a special 0.7pc discount on standard equipment lending rates.

The deals cover investments worth $10,000 to $5 million and involve initiatives ranging from solar and methane capture projects to more energy efficient tractors.

The National Australia Bank (NAB) has had similar deals through a CEFC partnership for two years, making about $300m available to business customers at a discount rate.

“After surveying 5000 of our farmers for two consecutive years, 85pc told us they saw energy costs as a significant business risk,” said NAB agribusiness general manager, Khan Horne.

Of the initial $120m NAB offered in CEFC finance, 87pc was taken up by agribusiness and rural customers.

More than 80 per cent of farmers see energy costs as a significant business risk says National Australia Bank agribusiness general manager, Khan Horne.

More than 80 per cent of farmers see energy costs as a significant business risk says National Australia Bank agribusiness general manager, Khan Horne.

The trend was similar for CBA, with NSW agribusiness head, Margo Faraci, agreeing energy prices were clearly weighing on the minds of farmers and regional business operators.

Farm sector borrowers were over represented among those investing in power saving initiatives.

About half the special loans taken up since CBA began offering them last year had gone to agribusiness clients.

“A lot have been for electricity cost saving projects such as solar panels to supply the farm and feed electricity back into the grid,” Ms Faraci said.  

“Others have borrowed to replace older electric and diesel pumps or big machinery items like headers or older tractors.

“I’ve met one customer who reduced his diesel fuel consumption by 2.5 litres a hectare which at $1.25/l roughly worked out as a fuel saving to his business worth almost $90,000 a year.

“Importantly investing in more efficient equipment doesn’t just save you money on electricity and fuel costs, it also cuts carbon emissions.”

Businesses worried

As an indicator of the level of business concern about energy costs, the bank’s research early this year found 15pc of bigger businesses with at least $25m annual turnover used energy efficient equipment, but soaring  power costs, meant this figure was set to leap to 40pc by December.

Competitive investment finance options and more efficient energy products were helping drive the upgrades. 

Hot water units are on average the biggest single users of power in NSW - Will Lulham, Namoi Sustainable Energy

The fastest way to prune typical power bills is to invest in more efficient hot water systems, notably solar, according to Tamworth-based Namoi Sustainable Energy director, Will Lulham.

“Hot water units are on average the biggest single users of power in NSW, he said.

“They’re a particularly big drain if you have a dairy farm or use hot water on a commercial scale such as in food businesses,” he said.

Interest-free

Attractive interest-free loans over 40 and 50 months and term lease arrangements for hot water and solar panel installations, as offered by major suppliers such as Solahart, had helped drive spending on renewable energy and battery storage.

Mr Lulham said in most cases the savings made on power bills after installing rooftop solar kits, or panels in paddocks near mains power lines, repaid their investment cost in four or five years.

A $1000 a quarter electricity bill was likely to shrink to just $400 after a $10,000 investment in PV solar panels, assuming the consumer was regularly drawing power during the day.

Meanwhile, average farm or urban households currently spent about $1000 annually on water heating, a cost which could be almost eliminated by investing $5000 to $7000 in rooftop solar heating, if there was adequate exposure to direct sun.

Banks of solar panels are increasingly common on farms as producers opt to cut their own power bills and feed surplus power generation back into the grid or batteries.

Banks of solar panels are increasingly common on farms as producers opt to cut their own power bills and feed surplus power generation back into the grid or batteries.

Mr Lulham’s business had seen strong interest from farmers and others trying to avoid rising electricity prices.

“We’ve had everybody from farmers to accountancy firms coming on board with PV (photovoltaic) panel installations in the past few years, and a lot of recent interest in batteries, too,” he said.

Stored savings 

Installing an appropriate battery system could, over a year, reduce the average household’s need to draw electricity from the grid to just three nights a week.

Today’s batteries were not just sleek and relatively easy to accommodate on a shed or garage wall, but offered more and more storage capacity without rising in price.

Tesla’s compact Powerwall batteries, available for the past two years with about six kilowatts hours of capacity, were now storing 13.4kW, but cost no more to buy.

The story was similar with solar panels.

A year ago typical PV panels generated about up to 255 watts/hour, but they were now converting sunlight at about 290w/hour.

Victorian orchardists and solar converts, Chris Georgopoulos and Jimmy Kalafatis, at GV Storage in Shepparton, used an energy efficiency finance offer from NAB to cut their power grid consumption by more than 65pc.

The second generation apple and pear growers handle about 66,000 bins of fruit a year.

“We require a massive amount of power, so we investigated solar,” Mr Georgopoulos said.

“The energy efficiency loan made the business more sustainable.”

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