Farmer's Weekly (South Africa)
Global Farming
Faced by sharp increases in electricity tariffs and unreliable supply, farmers need to consider switching to alternative sources of energy.
Eskom’s recent load shedding once again put South Africa’s electricity supply in the limelight. It is unclear whether Eskom indeed faces electricity shortages or whether its actions are once again part of a strategy to influence the National Energy Regulator of South Africa’s (NERSA’s) imminent decision on Eskom’s tariff application.
In its NERSA application, Eskom indicated that it needed a 90% tariff increase to make up for the shortfall in its past income. However, being a benevolent, publicspirited entity, Eskom is not asking for a 90% increase, but only for a ‘modest’ amount, both in its application for the next period and its application in terms of the ‘regulatory clearing account process’, where it can ask for additional money to cover over-expenditure in previous periods. This provision means that whatever Eskom doesn’t get up front from NERSA, it can claw back later.
According to Agri SA, the latest application would put Eskom’s tariff increase over the past 12 years at 476%, or nearly 14% per year! If you compare this increase with the increase over the same period in agricultural input costs and agricultural product prices, it is clear that Eskom is pricing itself out of the market.
lack of maintenance
The reliability of machinery can be divided into three phases. In the first, equipment fails because of material defects, design blunders and errors in assembly. We’ve seen a recent, well-reported example of this at the Medupi power station.
After the initial teething problems are sorted out, the equipment enters the phase of ‘low and random failures’. Complex machinery can remain in this phase for a long time provided planned maintenance keeps system reliability at acceptable levels. Eskom CEO Phakamani Hadebe has already confessed that Eskom’s ‘unplanned maintenance’ is at too high a level.
If complex systems are not maintained properly, we reach the third phase: worn out. If you run a tractor without changing the oil, it will evitably fail in time. The same is true of South Africa’s electricity supply system. Without proper maintenance, the chance of a complete system breakdown is very real. South Africa is committed to a 34% reduction of greenhouse gases (GHGs) by 2020, and a 42% reduction by 2025. Pressure on farmers to reduce their carbon footprint will increase. Consumer awareness of environmental issues is increasing, thanks largely to the retail sector.
Currently, environmentally friendly production practices do not yet result in higher product prices, but will do so in future. Some financial institutions are also prepared to finance clean energy projects on more favourable terms.
Do your homework: establish the expected life of photovoltaic panels and batteries
alternative energy vs eskom
To make the right decision, a farmer has to take a number of factors into account when comparing the cost of alternative energy sources with Eskom electricity.
Firstly, although the annual increase in Eskom tariffs is uncertain, there is no chance of a tariff increase below 10% per year.
Another key factor is Eskom’s unreliable supply. In most cases, farmers already have standby systems to provide electricity for core functions, unfortunately at a high operating cost. A dedicated off-grid system would ensure greater reliability.
A comparison of the monthly Eskom fee with the monthly payment needed to repay the capital investment over a reasonable period will give a clear indication of the economic viability of switching to renewable energy. Farmers who rely heavily on electricity for their operations should add a risk penalty to the monthly Eskom bill.
Part of your calculations should involve the cost of replacing photovoltaic panels and batteries. Do your homework and be realistic; estimates of the expected life of these components differ widely.
In addition, the supply of renewable energy is a new field in South Africa and there are many service providers, so ensure you choose a reliable vendor.