New thinking needed about regional electricity supply

Rural Australia needs access to affordable electricity to achieve ambitous government targets for growth in agribusiness. 

Agriculture is a major energy user both on farm and up the value chain in transport, processing and cold storage.  Increasing electricity costs, however, are threatening both growth and competitive advantage, particularly in the high value markets for fresh, premium foods.  Each year, farmers are getting a lower return on the money they spend on energy. 

Most sectors of Australian industry have achieved significant gains in energy productivity over the past decade.  The conspicuous exception is agriculture where energy productivity is declining.   The chart below shows a decline of more than 21% since 2008.  Why is this occuring despite advances in technology and investment in efficiency measures?

Indexed energy productivity performance of industry sectors. Agriculture energy productivity has declined 21% since 2008

NSW Farmers

Our analysis suggests this falling energy productivity is due to increased network charges for electricity and, related to this, increased reliance on diesel for high seasonal energy loads such as irrigation pumping.  

Urban centres have historically subsidised regional electricity supply - it is not profitable to run and maintain lines to widely distributed regional customers who typically have difficult, seasonal peak loads.  The move to cost-refective pricing is removing these subsidies but begs the question of how regional users will in future be able to access the electricity they need. 

Electrification is a priority for most sectors of agriculture and is key to general productivity and sustainability gains.  Electricity is the preferred energy source for pump and other farm motors, being cleaner and lower maintentance than diesel. In addiiton electricity enables digital precision control systems, autonomous vehicles, robotics and so on.  Today, however, we are moving in the wrong direction as high network charges drive farmers to disconnect from the grid.  For example, we are seeing irrigators investing in diesel generators to supply electric pumps which have existing, but unaffordable, network connections.   

Australia needs to think differently about how to supply electricity to regional industry. Renewables can and must play a key role but equally important is making better use of existing network infrastructure to facilitate load shifting and strategic feed in arrangements. To this end, NSW Farmers is liaising with distributors and other energy industry stakeholders to help identify ways to reduce the net costs of regional electricity supply.

Watch: Smart grids and renewables for regional Australia

Going 'off grid' is a viable option for some farmers and remote rural communities but in most cases 'hybrid' models implemented in collaboration with distributors make more economic sense.  For example, under a  regional demand management plan, a distributor might collaborate with industry to install enough solar across an irrigation district to shed the peak load imposed on the network in peak pumping season.  There are many scenarios for achieving least cost electricity supply, which need to be identified on a geographic and structural basis. 

Policy, not technology, is the main barrier to this kind of innovation.  Current state and federal energy policy tends to focus on urban  and heavy industry energy supply and miss the special challenges and opportunities that exist outside the major load centres.  In this regard, a national 'action plan' focused on regional electricity supply would help to:

• incentivise demand management collaborations between distributers and users
• drive more strategic deployment of renewable generation in regional industry
• clarify the suitability of new distribution, generation and storage technologies for particular regions and industry development scenarios

For more about NSW Farmers energy initiatives see:

Farm energy innovation program

Water & Energy Nexus initiative

Solar powered pumping initiative

Reducing energy costs in Dairy initiative